You’re a one or two-person business operation. You can’t afford an entire accounting department. Fortunately, you don’t have to. A lot of the newer POS systems out on the market are actually iPad POS or cloud-based systems. These systems take care of a lot of the back-end stuff you would normally pay a bookkeeper for, like inventory management and tracking. But, before considering a credit card for your business, there are few important questions to ask a potential credit card processor.
Understand Industry Jargon
Before you sign on with a merchant provider, read a few Square reviews. Now, read reviews on Intuit and other older operations. Notice a difference? Some companies are made for small businesses, while others typically cater to enterprises that are well-staffed. Make sure you know what you’re getting into.
Some of the basic jargon you’ll come across includes “merchant bank,” “processor,” “issuing bank,” and “card payment brand.”
The merchant bank is simply the financial institution that provides the merchant account services. In other words, it’s the bank that processes the transaction for you. A “processor” is a third-party, or middleman, that helps to facilitate transactions on your behalf. Why work with a processor? Because it can reduce certain revenue requirements and streamline the payment process for you.
Most merchant banks expect you to have your own IT on the backend to build a shopping cart, manage the front end of the transaction, and to remain PCI compliant. A processor helps you fulfill those obligations by providing value-added services and also by consolidating merchants into a single, or a few, accounts.
Many small businesses simply do not qualify for a traditional merchant account due to their size. The processor overcomes this by being a merchant’s merchant. The issuing bank is the bank or lender that issues the credit card to your customers. So, you’ll often hear or read about this in the context of customer bank cards.
Lastly, the card payment brand is the brand of card used in the transaction, like Visa or Mastercard.
Get a Simple Card Processor
Your job, as a small business owner, is to get a simple card processor. In most cases, you don’t need to get an actual merchant account. If you run a mobile business, or you want the ability to take payments from anywhere, choose a provider that offers this option.
Make Sure You Meet The Volume and Revenue Requirements
Make sure you meet the minimum requirements for the processor. Even though they take the burden of the merchant bank off of your shoulders, they may impose their own revenue requirements.
Make Data Security A Priority
Many processors have their own security protocols but, if you host any payment options on your own website, you will have to make sure that you are PCI compliant. Even if the processor redirects payment to its own servers, there are still minimal security audits that must be done where the collection of credit card numbers happens.
Watch The Fees
Credit card processors, and merchant banks, charge fees. These fees can easily consume several percentage points of your sale. So, if a fee amounts to 2 or 3 percent per transaction, it means you will pay 2 or 3 percent of the sale price to the processor. Add to this the standard monthly fees, like statement fees, monthly minimum fees (which are only charged if you fail to meet the monthly minimum in transaction volume), and flat per transaction fees, and you have a lot of fees on your hand.
Some companies also charge customer address verification fees and gateway fees. Look closely at the fine print. It’s like buying anything else. Shop for the best value – lowest fees and best service.
Ronald Gerdes has managed a small business of his own for several years now. He likes to share what he has learned over the years to help other business people succeed. You can read his informative articles on many websites and blogs today.