Having the power to accept debit and credit card payments is essential to your growing business, but sifting through the options presented by payment processing companies to find the right merchant account for your business’s needs can feel overwhelming. There’s so much information out there about payment processing that even figuring out where to begin is a disorienting prospect. Here are a few essential questions to ask processing companies to get you started in finding the merchant account that best fits your needs.
What exactly is a merchant account?
A merchant account is a specific type of business bank account that enables you to accept electronic payment sources, generally from debit or credit cards. When a transaction is made, the electronic terminal or payment gateway sends the information to the merchant acquiring bank, which communicates it to the card processor, which then queries the issuing institution for authentication. If the transaction is successfully authenticated, the merchant bank is notified, and then begins the process of transferring funds to your merchant account.
How soon can I get up and running?
For some, the promises of aggregate payment processing services like PayPal or Square have skewed expectations for the merchant account application process. An individual merchant account personalized for your business’s needs won’t be set up within minutes, but the process shouldn’t take more than a few days, provided that you supply all the necessary documentation your provider asks for.
What are the terms and requirements of my merchant account?
This question is so critical to finding the right merchant account for your business that it’s best broken down into five smaller parts.
1. What are the minimum and maximum limits for my merchant account?
These limitations are particularly important to understand for a new business that’s just finding its feet, a business that expects to experience substantial growth in the near future (perhaps with the introduction of new product lines or new markets), or businesses that experience significant seasonal fluctuations in transaction volume. Some merchant account providers will charge a minimum monthly fee, in the event that your transaction fees don’t reach a set threshold. You may also be asked to estimate your monthly volumes and have transaction limits set in place based on this initial information, preventing you from processing more than a certain amount in a given month. The purpose of this is to limit the payment processor’s liability, but it can frustrate merchants with growing businesses. You may find yourself needing to renegotiate the terms of your merchant account if you keep running into monthly limits. Durango Merchant Services can assist you with this.
2. What are the rates for different types of transactions?
There are a number of ways to classify card transactions. One way describes how the card information is received – a physical card swipe at the point-of-sale terminal, which is more secure than keying in card information received over the phone, which is more secure than an eCommerce transaction. With each increasing level of risk for fraud, the fee for each type of transaction typically increases. Some payment processors have to pay a higher fee to your customers card issuing bank depending on the type of payment card being used (personal, business, or reward card). This becomes a problem when you’re quoted one rate to convince you to sign on with a processing company, but you find out after the fact that some of the cards you accepted don’t qualify for that low rate. Durango’s Quotes will always be very transparent and list out all the fees. We normally quote cost plus rates AKA interchange plus.
3. What about payment gateways?
You may be using a gateway provided by your payment processor (in which case you’ll want to understand what fees they charge for the service), or you might have a separate payment gateway to integrate with your merchant account and your website.
4. Does your merchant account provider have an integration specialist to help you with this? What features does their payment gateway offer? What’s my discount rate, and what “other” fees will I be charged?
The discount rate is the basic merchant account fee; it’s the percentage of each transaction charged by your merchant account provider. This often starts at 1.5 percent and may be higher, depending on numerous factors including the transaction type (and thus the level of risk), your business model, whether the transaction is international, and so on. Retail Sales where you swipe the credit card are always going to be the lowest rates available whereas E-commerce or phone order sales will be highest. Your merchant account may have other fees in addition to the discount rate, but you should understand up front what all these charges are going to be; some companies hide these fees and count on you not asking questions.
5. How long is my contract?
Many payment processors will require a contract term, often one or two years, with early termination penalties or cancellation fees built in. This can make it costly to switch processors if your merchant account provider isn’t meeting your business’s needs.
What kind of customer service and support is available?
You can get a feel for some of this when talking with the person helping you set up your account – if they’re eager to answer your questions and explain details, that’s a good sign. You’ll also want to check whether a provider offers 24/7 live support, however – if you run into technical problems, you need real help right away. The longer your payment processing system is down, the more sales you could lose! The best companies offer account managers for the life of the account.
Does the company have a good reputation for customer satisfaction?
You should be able to find plenty of reviews from fellow merchants who have worked with the payment processor, both on the company’s own website and on forums and third-party review sites. Look at the bad reviews and horror stories, both to know which companies to watch out for, and to get a feel for the kinds of problems that other merchants commonly face. If merchants respond positively to a particular company, look for details there too; does the payment processor go out of their way to provide support to growing businesses? Do they provide quick and helpful responses to merchant questions and concerns? When you apply for a merchant account, your business is vetted, but the processing company also needs to earn your trust.