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Choosing a Credit Card Processor

Aug 10, 2012

Unfortunately, credit card processors seem to have many areas where they feel justified to charge you a fee.  Different processors levy different fees for different services, and the fee percentages vary.  Thus, choosing a processor on the basis of cost alone is very difficult.


Merchant accounts are always charged a “discount rate,” a percentage charged on each transaction.  The amount is based on your company’s evaluated risk, average sales ticket, transaction type, and total charge volume.  Most providers charge one rate for card-present transactions and a higher rate for MOTO (mail order/telephone/Internet) transactions (card-absent).  Card-present transactions usually cost between 1.5% and 2%.  Card-absent transactions range from 2.2-3%.  Some companies levy a monthly minimum fee, ranging from $25 to $35/month.  If your volume is low, be sure to ask about this charge.  The merchant bank will also charge a “transaction fee,” that is between $.20 and $.30 for card-present transactions and $.30 and $.50 for card-absent transactions.  Some may also charge to issue monthly transaction statements.  


If all of those charges are not confusing enough, there are additional costs.  A basic terminal to process card-present transactions will run between $150 and $300.  Terminals with printers are $200-$500, and wireless terminals can run from $500-$1,000.  Alternatives include purchasing used equipment and leasing a terminal.  Access the Ebay “Credit Card Terminal Buying Guide” at  You will have to be sure that any used equipment will work with the software that your processor is using.  For card-absent transactions, a terminal is not required.  You can use “virtual terminal” software to verify transactions from your PC.  Sometimes this software is provided free as part of an e-commerce package.  Purchase price runs about $150.


We’re still “not done yet.”  Some providers charge application fees of up to $200.  These charges may be non-refundable, even if your business is turned down for an account.  There may also be set-up or account activation fees.  Other possibilities include programming fees, Internet processing fees, customer support fees, early termination fees, and more. 


Some additional tips . . .  Be sure to ask how long it takes for funds to transfer.  MOTO transactions usually take considerably longer to clear.  Check to see if the variable fees such as set-up, cancellation, and monthly minimum, are negotiable.  The higher your dollar volume, the more likely the company will be willing to work with you. 


Customer support is an important part of the package.  You may want to check references with other merchants using the providers you are considering.  Also ask about wait time, chargebacks, staffing hours, and charges per incident.  If you are selling online, be sure that the processor offers secure ordering through SSL.  Finally, and probably most importantly, be sure that the company you are planning on working with is legitimate.  Check for their physical address and phone number. 


Read your contract very carefully.  Be sure that you understand all fess, minimum charges, the term of the agreement and any early termination penalties, in addition to.the services and policies of the providers you are considering before you choose. 

Category: Ecommerce

Cindy Unger

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