SO one of the first questions I am often asked is simply, "What do I absolutely style="font-style:italic;">have to pay?" Not a bad question, so let's jump right in.
Basic Fees
On each and every transaction there are two fees: a Discount Rate which is a percentage, and a Per Transaction Fee which is a flat number. One cannot avoid these two costs. No matter what these will always, always be charged. The main thing one has to do with these are to minimize them. If you do a larger amount per item, but not as many items per day, your Discount Rate should be proportionately lower, while your Per Transaction fee is less important. However, if you do small dollar amounts, but you do a whole lot of them the Discount Rate affects you less, but your Per Transaction Fee is critical. Examples of these are almost anything for the first category such as car maintenance, bedding, home entertainment, while the second is more like convenience stores where they sell under $10 per customer, but sell several hundred times a day.
Equipment
Most of the time, you can generally wrangle a free terminal or software setup out of the company that is setting up your merchant account. Here is where bids help. If you cannot, one can almost always get a great discount. If not, walk away, because something is rotten in the state of Denmark, Hamlet. Read my How Can I Get It Free? for extra meat on this, but here is the main point: They want your merchant account as that is where they make money. All else is gravy, and gravy is highly negotiable.
Industry Traps
The worst thing about accepting credit cards is that it seems there is little method to the madness, only more madness. I spend a lot of time on how Rewards Cards put the screws to the merchant in Sky Miles Cost Your Business, and it's all true unfortunately. The short of it is this: if a customer uses a rewards card at your business, you pay an additional 0.3%. That may seem like chickenfeed, but that chicken eats good, ...really good and all on your dime (sorry about mixing the metaphors. I get emotional).
Getting "Ding'ed"
A 'ding' is any fee that the industry tacks on after the sale. Rewards Cards are one, but the most common is poor data collection and entry. In short, the transaction cost your business more, because there was not enough information, or not enough good information to be able to charge you less. The most prevalent and worst example is entering the wrong zip code that your customer's card is billed to. You get ding'ed by having the authorization go through not as a qualified sale, but at a higher fee tier called a 'Mid-Qual' or a mid qualified rate. Sadly, you may have gotten this information AND have put in in correctly, but the customer simply gave you the wrong data. You would not believe how many people do not know where their card is billed to. Is it home? Work? Or that address where we signed up for the card seven years ago, but haven't lived at in three?
Monthly Fee
OK, so everybody has a monthly fee, but they should be fairly innocuous. Here's the rub: if it's any more than $10-12, someone is getting a bonus and needs to bee shown the door. These are small fees and if they want your merchant account, they should hand that to you at cost.
Everything Else
That's about it guys and gals. Everything else is, well ...everything else and is very negotiable and dancing around the "show them the door" policy. Sign up fee: Bogus. Show them the door. Set up fee: Bogus. Show them the door. Annual fee: door. Report fee other than the monthly statement fee: door. If your business does a $1,000 a month in credit card sales and they want to charge you for equipment: door. Contract longer than three years: door. Contract three years, but equipment contract four years: door and a boot in the tuckus.
If you have seen any odd fees and you have a question, please post it and we will dedicate some time to it.
No comments:
Post a Comment