Thursday, April 22, 2010

Credit Card Processing

Are you thinking about accepting credit card payments?  It’s in your best interest to know what types of fees are charged by various merchants so you can estimate your costs before you sign on.  Some of the terms might be new to you.

Startup Cost includes the cost to set up your account and the Payment Gateway.  A Payment Gateway service verifies your customer's credit card information, judges the authenticity of the transaction, then either declines or processes the credit card payment.  Gateway fees are commonly charged by month and range from $5 to $15.

Most every credit card processing company charges a statement fee. The current industry standard is $10.00 per month.

In addition to start up and monthly fees you will be charged fees based on your transactions.  A transaction fee is a per charge fee that is the same no matter how small or large the transaction is.  The fee may range from $0.20 to $0.30.  In addition you will be charged a Discount Rate.  The amount is a percentage of your sale.  Both of these fees might vary depending on whether the charge is retail or over the Internet.  The retail discount rate tends to be lower than the Internet discount rate by about .5%.  Expect to pay anywhere from 1.6% to 2.3%.   Another per transaction fee is the Address Verification Fee. Every time an address is verified you will be charged.  The range is $0.05 to $0.10.

Some merchants require a monthly minimum and if you don’t meet the minimum you will have to pay the additional amount.

There are many different models of credit card swipers and some merchant account companies offer more than one for their retail customers.  When you display and sell at Art Fairs you’ll need a way to process the credit card at your booth.

Other things to consider when choosing your merchant and setting up your account is the amount of time it will take for the money to clear the account.   This could be 1 day to 3 days unless you have Real Time Processing which means that right after the customer enters required data, the payment gateway will research the validity of the transaction and process the credit card.

Finally, customer service adds value to the account.  If ordering supplies is easy and the representatives are friendly and helpful you will be happy to do business with them.

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