I know this has been a little while coming but I think I am finally at the point where I have a little time to write more frequent posts. Before, I start part 2 of merchant services, I would like to mention that we have added some add’s to the blog so if you see anything you like please feel free to click through and help support the us.
OK, on to merchant services. In my last post on this topic I spoke about the steps it takes to set up an account and what the value chain of the industry looks like. This post is specifically about fees. Everyone who accepts credit cards hast to pay something (even Target and Walmart) but you can do several things to help minimize your costs, even as a start-up. How do I know this? I know because A) I used to sell merchant services and B) I just went through the process of setting them up. Here are a few steps to take to minimize your costs:
- First understand your busienss. Specifially, what will your typical ticket size be Vs. how many tickets a day will you process. This element is key because every merchant processor is going to charge you in two ways; 1st a per swipe transaction and 2nd a % of the total bill. They dont advertise this, but merchant processors are willing to negotiate prices on both of these cost elements (i.e. charge a smaller per swipe for a higher % and vice versa). This is why it is important to know your business. If you do very few swipes but have large ticket sizes you are better off with a low percentage and a higher per swipe charge. If your company does a lot of volume with small ticket sizes then you would want a little higher percentage with a lower per swipe (scrubadoo.com for example). The better the idea of what your transaction size and volume will be the more optimal your fee structure can be.
- Ignoring their publicly advertised pricing, look for a few processors that you are comfortable working with. Research the company, how they do business, even ask for client references (people you can actually call). Just like every other part of your business do your due dillagence on your merchant provider.
- Once you have identified your top two or three choices for providers contact them and ask them for a quote. Make sure you tell them what you are looking for in pricing (remember you know your business better than they do and they can taylor thier quotes to what you specify i.e. small per item and high %). It is also important to take into account the equipment you will need. If you are an e-commerce site you will need none. But if you have a brick and mortar shop you will need processing equipment. The newest wireless technology can be close to $1,000 for one machine. It is important not to ignore this aspect of pricing. Once you have the quotes in hand you hold the power in the relationship. You have choices and all of the processors want your business.
- Again, ignoring pricing, decide which processor is your top choice. If your top choice also has the best pricing you are done (although it never hurts to tell them you are looking at other companies to see if they will throw in free equipment etc). If they are not the lowest, tell them. They will likely ask for any lower quote in writing. Give it to them. Most companies will at the very least match competing offers, more than likely they will actually beat competing offers.
- Now you have your preferred vendor at the best pricing you could have hoped for.
- Re-visit your account at the very least annually, see if your pricing is still ideal for your company. As you grow don’t be afraid to renegotiate. The bigger you are the more valuable you are to your processor.
That is my breakdown on merchant services pricing. We are currently using Authorize.net as our gateway and BB&T for our processing. If you are in a region where you can use BB&T give them a shot. They are very good at both service and pricing.