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How To Accept Credit Cards For Your
Business Without Being Taken For A Ride

by Jay Lindsay
Copyright 2015, National Business Reports, All Rights Reserved


It would seem that getting a merchant account which allows your business to accept credit cards would be a simple process — as it should and can be if you know what traps to avoid.

For those just starting out in business and especially if you are operating from your home, you should expect that it can be a very intimidating process. The good news is that by reading this report you will be receive some very valuable information that will inform you of how things operate and how you can turn things around so that you win the game of "new merchant gotcha."

If you are going to be in business you need to be able to accept credit cards, no ifs, ands or buts about it. It has been solidly proven that customers buy more when they have the option to pay using their credit card. In fact, some customers may choose not to do business with you at all unless you accept credit cards.

So, with that said, let's look at your options — and there are only basically two.

(1) First, you can walk into your local bank and ask to speak with someone about opening a credit card merchant account. This is perhaps your best bet if you have a good working relationship with your bank . Most banks can set you up to accept Visa® or MasterCard® and can provide information about others cards you may choose to accept.

(2) The next choice is setting up your merchant account through what I call a "Service Provider." This is a company who has contracted with the credit card companies and thus allows them to assist merchants in accepting the various credit cards.

Neither the bank nor the Service Provider will provide you the opportunity to accept and process your credit card charges without an array of fees:

Discount Rate - This is the fee for every charge made and normally will range from about 2% to 6%.  Example:  If you are at a 3% discount rate and accept a $100 charge your fee will be $3.00 for handling the matter for you.

Transaction Fees - For each transaction you make you will be charged from about 20¢ or 30¢ for the right to use the network that approves and accepts the charges.  The monthly transaction fee is normally not a concern unless you are processing thousands of charges.

Monthly Fees - These will have many names and are basically a way the providers up their profits.  Most will attempt to charge you $10.00 a month or more to provide you with a monthly statement (listing your charges and fees) which probably costs them not much more than a postage stamp and a sheet of paper.  Some will want to charge a program fee (up to $25 a month) supposedly to reprogram your terminal if required.

Annual Fee - This is not one of my favorite fees and I consider it just another way to put some extra bucks into someone's pocket.  This fee is relativley new and is basically a charge for doing business with them.  Expect that it may run from $30 to $100 a year.

Application Fee - Yes, it costs a provider time and energy to review your application, run a credit report on you and to get you set up and educated as to how to process credit cards.  Some reasonable fee for their time is acceptable but I would never pay such a fee in advance without a guarantee that it would be refunded if I was not accepted for merchant status for any reason.  And, I would stress that the fee must be reasonable — perhaps under $100.00

The Big Traps - Certainly, as in every business transaction, you want to carefully read any contract that you may be signing.  I would urge you to watch for three very important things when agreeing to accept credit cards:

  1. There is often a monthly minimum that you must pay to either the bank or the service provider even if you never process a single charge.  This minimum can be $25 or more and it means that is minimum the provider wants in Discount Rate Fees each month.  If you are at a 3% discount rate, this means that you are expected to process more than $833 in charges each month or the minimum charge kicks in.  For a small beginning business this could cause problems in the first few weeks of operation.
  2. If for any reason you should choose to discontinue your merchant account within a short period of time, you may be required to pay a cancellation fee which can cost several hundred dollars depending on the contract.
  3. This is most often where the "big gotcha" can occur.  It has to do with the leasing or purchase of the equipment required to swipe or input charge card data. Some companies — including the banks — attempt to charge outrageous prices for these devices.  Some of the slick salespeople can make it seem such a good deal when they mention that we can reduce the discount rate you pay if you lease the terminal from them at only $39 a month. Before you know it, you may get caught in 48-month lease which could cost you nearly $2,000 for a machine that can be bought new for about $65.00 — and that lease cannot be cancelled!

Please don't be alarmed. You now have the ammunition to negotiate with the various merchant account providers as you search for the best deal for your particular needs. Do remember that everything is negotiable and there are other fish in the sea. You are not required to accept their first offer. You can ask for their very best deal and don't be afraid to tell them that you are not afraid to put them on hold while you shop other sources of merchant services. Being polite yet firm, in the long run, can save you bundles of money.

"So, what next?" you ask. Let me direct you to some sites that will help you make your decisions:

Have A Merchant Account for Just $5.00 a Month - This company should be seriously considered for those who are just starting a business and want to keep their startup costs extremely low.  Their discount rate may seem a bit higher than others until you find that virtually all other charges are included for the one fee. There is no need to purchase or lease a processing terminal as all transactions can be processed using a push-button or smart phone. Details


Buy Credit Card Terminals - This organization offers a number of different credit card processing terminals which are sold at reasonable rates. This is where I bought my last processing terminal. Details


Electronic Transfer, Inc - This company has been around for a good many years and offers a variety of options for merchants of all sorts. Details


PayPal - This is a good option for those operating an Internet site.  You can qualify and be accepting payments on your site within 24 hours.  They also offer, at no additional charge, a shopping basket program. Details

Sign up for PayPal and start accepting credit card payments instantly.


As a final thought, be aware that you don't necessarily need to accept all credit cards. Many merchants, especially new startup ventures, do fine just accepting Visa® and MasterCard® and never even contact the others like American Express® or Discover®. You may wish to also investigate the companies (PayPal is one) that allows you to accept and process individual or company checks by phone.

Good luck to you.


National Business Reports PO Box 99 Spring Branch, TX  78070


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