Do you allow your customers to pay by credit card? Do you want to opt for credit card processing but are perplexed by the many fees and charges involved? Are you confused by the different fee structures of credit card processing companies? Do you want to accurately estimate the cost of credit card processing for your business? If yes, then read on to find out the charges for different aspects of credit card processing services.
In addition to paying the applicable fees for services received, you need credit card processing equipment to accept cards. You can opt for lease or purchase of equipment. Lease costs can be as low as $20 per month. Leasing is a good option for merchants who want to try credit card processing services to assess their utility for the business.
Costs rise with machine sophistication. Purchase of basic models will cost you $150-$750. Wireless terminal prices vary between $500 and $1000. Purchasing is suitable for merchants who want to permanently incorporate credit card processing into their businesses. Some companies require you to purchase hardware terminals from them as part of their package. This lowers costs but prevents you from using third party equipment.
For online credit card processing, you need your computer, and credit card processing software to verify transactions with virtual terminal programs. Information can also be verified over telephone and processed manually. This, however, is slower than automatic processing and more risky. These options are less expensive than hardware costs.
Credit Card Processing Fees
Credit card processing companies charge you a number of fees. These are as follows:
Discount Rate: It is percentage of each transaction charged by your credit card processing company and normally varies between 1.5 to 3 percent. Discount rate is based on mode of payment and is lowest for debit cards. Discount rate rises with risk involved in the transaction. Banks and big companies often charge different rates for different types of transactions. When the credit card is absent, you may be charged a discount rate of 2.2-3 percent. For immediate transactions, where the card is present, discount rate ranges from 1.5 to 2 percent.
Application Fees: Some credit card processing companies charge you a fee for processing your application. This fee may be non-refundable and as high as $200-$300.
Startup Fee: This is the setup fee for creating a credit card processing account and configuring terminals. A startup fee of up to $25 is justified.
Statement Fee: Credit card processing companies usually charge $7-$10 for monthly statements of your transactions at the end of every billing cycle.
Monthly Minimum: To earn some assured revenue during slow business periods, credit card processing companies charge a monthly minimum fee when your transaction fees fall below a certain amount, usually $20.
Transaction Fee: It represents the minimum fee, usually 10 to 30 cents for every transaction. Transaction fee depends on the method of payment.
Charge Back Fee: You are charged a certain fee for each successful or unsuccessful reversal of charge. Your credit card processing company will allow you to void a few transactions every month before asking you to pay the charge back fee. Chargeback fee ranges from $15 to $50.
Termination Fee: If you terminate your contract before the agreed upon time, usually 1-3 years, you are charged a termination fee of $100-$300.
Gateway Fee: Charges for setting up and maintaining a shopping cart function and portals for accepting and monitoring your client payment and other online processing services cost around $10 a month.
As a general rule of thumb, credit card processing services cost you around 2 percent of your total credit card transaction amount. Get every fee in writing before signing the contract. Make sure you understand what you are paying for, whether the service is necessary and if you are receiving it. Survey the market thoroughly and don't stop till you find the most reputed and affordable credit card processing company for your business.