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A weekly look at Wyoming business questions from the Wyoming Small Business Development Center (WSBDC), part of WyomingEntrepreneur.Biz, a collection of business assistance programs at the University of Wyoming.
By Cindy Unger, WSBDC business adviser
“We are just starting a new retail business that will have both a physical and an online presence. What can we expect in terms of charges from a credit card processor?” Christine H., Casper.
Unfortunately, credit card processors seem to have many areas where they feel justified to charge a fee. Different processors levy various fees for different services, and the fee percentages vary. Choosing a processor on the basis of cost alone is difficult.
Merchant accounts always charge a “discount rate,” a percentage charged on each transaction. The amount is based on a 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 1.5-2 percent.
Card-absent transactions range from 2.2-3 percent. Some companies levy a monthly minimum fee, ranging from $25-$35 per month. If your volume is low, be sure to ask about this charge. The merchant bank also will charge a “transaction fee,” which is between 20-30 cents for card-present transactions and 30-50 cents for card-absent transactions. Some also may charge to issue monthly transaction statements.
If all those charges are not confusing enough, there are additional costs. A basic terminal to process card-present transactions will run between $150-$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 http://pages.ebay.com/buy/guides/credit-card-terminals-buying-guide/. Be sure that any used equipment will work with the software your processor is using.
For card-absent transactions, a terminal is not required. Use “virtual terminal” software to verify transactions from a PC. Sometimes this software is provided free as part of an e-commerce package. Purchase price is about $150.
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, and other possibilities include programming Internet processing, customer support and early termination fees.
Be sure to ask how long it takes for funds to transfer. MOTO transactions usually take considerably longer to clear. Check if variable fees such as setup, 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 also is an important part of the package. Check references with other merchants that use providers being considered. Ask about wait time, chargebacks, staffing hours and charges per incident.
If selling online, be sure that the processor offers secure ordering through SSL. Finally, and probably most important, be sure that the company selected is legitimate. Check for a physical address and phone number.
Read your contract very carefully. Be sure to understand all fees, minimum charges, the term of the agreement and any early termination penalties, in addition to the services and policies of the providers being considered.
A blog version of this article and an opportunity to post comments is available at http://www.wyomingentrepreneur.typepad.com/blog/.
The WSBDC is a partnership of the U.S. Small Business Administration, the Wyoming Business Council and the University of Wyoming. To ask a question, call 1-800-348-5194, email email@example.com or write 1000 E. University Ave., Dept. 3922, Laramie, WY, 82071-3922.