For all businesses, both brick and mortar and online, accepting credit and debit cards is a must. But it can be difficult to determine which processing company is best for your business. From cost to length of contract, selecting hardware and more, there is a lot to consider before setting up credit card processing.
Although it may seem like a credit or debit card transaction only occurs between your business, a customer and their bank, there are a lot of individuals and organizations involved in credit card processing. It’s important to understand their roles in the transaction.
First, the cardholder is the customer that is using a card to complete their purchase. Next is your business, or the merchant. The acquiring bank is your banking institution, while the issuing bank is the cardholder’s bank. Finally, the card associations are the kind of credit card (Visa, MasterCard, American Express, etc.). Now that you know who’s involved, you can see how the transaction works.
On the surface, accepting credit or debit cards seems like a seamless, simple procedure. But a lot of work goes into each transaction, and that’s where a credit card processor works on your behalf. The process begins when your customer swipes their credit or debit card. Then, your terminal (a device that swipes the card) communicates with the bank for approval. The bank sends an authorization, which ends up back at your terminal. After the transaction is completed, the next phase commences to settle out the charges. These two transactions (authorization and settlement) that occur between the bank and your business each incur fees from the processor, including additional fees if there is a failure at any part of the process.
Not too long ago, there were limited choices when it came to credit card terminals, and before that was the card imprinter. Today, however, there are many options when it comes to credit card hardware, and your decision about which to choose will depend on your business’s needs. Some businesses may also decide to use several or all methods.
Learning the ins and outs of credit card processing fees can be an overwhelming process, but it’s important to understand the basics so you can make the right choices for your business. There are several types of fees that you will incur when you accept credit or debit cards.
Beyond these fees, there are also costs for making transactions with the card associations. There are also markup fees, which go beyond the established fees outlined above. Markup fees are negotiable and can be discussed with your processor. The wholesale fees, as described above, are non-negotiable.
Each credit card processor will have a different agreement, so it’s important to read and understand the contract before signing. Once you have entered into a credit card contract, there are ways to negotiate and make the most of your deal. Each year, review your contract to ensure that you’re getting decent rates, service and treatment. Note your expiration date, because the period before you re-negotiate your contract will be the time when you have the most wiggle room. Avoid auto-renew contracts, because those will not allow for re-negotiation. Also, keep an eye on progression to ensure that the processing company keeps up with the latest technologies and implement systems that will best protect you, the customer.
It may seem daunting, but in the ever-changing world of credit, there’s always more to learn. For merchants, it’s important to keep up to date with the market and establish a solid relationship with your credit processor.
TN Merchant Services is a one-stop shop for our valued merchants. We will act as your consultant, guiding you to the processing solution that makes the most sense for your unique business. Our secure terminals, quick processing and support specialists are only a call away to ensure that your transactions go off without a hitch. With chargeback defense, echeck processing and, of course, no set-up fees, we’ll ensure that when you take a payment, you’re protected.
Contact us now to see how TN Merchant Services can take your business to the next level.
TN Merchant Services gives every business the merchant services they need so they can grow in volume, profitability and reputation.