Many businesses wait too long to accept credit cards because they aren’t sure how to get started. If this is you, here’s what you need to know to take your business to the next level.
There are two basic types of merchant account services:
- A dedicated merchant account and;
- A third-party service provider
Dedicated accounts are merchant accounts you open up directly with a bank or service provider that is responsible for processing credit card transactions.
A third-party service provider is a middleman, so to speak. The third-party provider obtains a merchant account, and then uses it to process transactions for many other merchants. While you do have a sub-account assigned to you, it’s not the same as having a dedicated merchant account.
In most cases, third-party providers won’t charge a monthly fee, unlike dedicated merchant accounts. But, the per-transaction fees tend to be higher. Third-party accounts tend to be ideal for businesses that have low transaction volume or are just getting started. Dedicated accounts are better for established businesses.
There are several major brands of cards, like Visa, Mastercard, American Express, and Discover. But, many merchant accounts let you process smaller brands, and cards issued by major brands for banks, department stores, and other companies.
Nearly all cards in the UK, and many cards in the U.S., use EMV “smartcard” chips, which replace magnetic strips used to store financial data and process transactions.
EMV cards are what you’ll most likely run into, and so it’s important to recognise them when you see them. They have a small chip on the card, which is inserted into a terminal. The terminal collects the card information, authenticates the cardholder, and processes the transaction for you.
The customer must either enter a personal identification (PIN) or sign for the purchase at the time of purchase.
Getting The Right Machine
There are many good PDQ machines out there, but it pays to research them and find a few that you think would be appropriate for your business. For example, traditional terminals and processing software is “static” – meaning it is usually secured to the countertop and can’t be moved anywhere.
These are typically used in established brick-and-mortar businesses
Newer machines are cordless, with some being mobile terminals. Mobile terminals are made for businesses on the other end of the spectrum – street vendors, businesses that attend a lot of events away from the office or storefront, and solopreneurs that are on the road making sales.
They’re also useful for businesses that sell their wares at farmer’s markets or other similar events.
Cordless is halfway between static terminal processing and mobile terminals, allowing businesses to place terminals in their business establishment, without the terminal being tied down to a specific location.
Also Read : HDFC Credit Card Tracking
All merchant service providers charge fees. In the UK, those fees range from Interchange rates plus an additional service fee and a per-transaction fee to a flat percentage of sales plus a per-transaction fee.
On top of transaction fees, you might encounter monthly service fees just for having a merchant account, a gateway fee for processing transactions, a batch fee to close out all transactions at the end of the night or week, annual fees (which you should try to avoid), and contract fees charged for cancelling (this only applies if you sign a contract and later cancel).
Just as with anything else, the goal is to pay the lowest fees possible. So, shop, shop, shop, and ask every provider for a list of all fees they charge.
Amber Manning earns a living in retail consultancy and understands the importance of being able to offer a range of payment options to customers. She is a regular online contributor and shares her insights on a number of B2B websites.