Tips on Accepting Credit Card Payments for Your Business
Author: Board Monitor
Board Monitor/ Administrator
Joined: 05 May 2003
Posts: 550
Posted: Thu Feb 24, 2005 8:52 am
Post subject: Tips on Accepting Credit Card Payments for Your Business
Following is a great article that appeared recently on abs-cbnnews.com that contains consumer tips on choosing a merchant credit card payment processor. Enjoy!
Merchants pay for right to use credit cards
The challenges that face business start-ups are familiar enough: scraping together start-up capital, hiring talent, fighting government red tape, recruiting customers. But pity small retail shops. For them, and other small businesses that rely on foot traffic or the Internet, a big frustration is getting a credit-card terminal up and running.
It is not a simple task. MasterCard and Visa require small businesses to enroll through intermediaries like payment processors, financial institutions or independent sales organizations, commonly referred to as ISOs, which solicit business through telemarketing and even door-to-door agents.
As new business owners soon learn, the process can entail analyzing dozens of seemingly incomparable offers that include varying terms for leasing the terminals, for accepting or rejecting credit and for issuing monthly statements, to name just the most basic services. And different intermediaries make funds available anywhere from 24 to 72 hours after a sale is made.
Last fall, Carlos Rodriguez got a quick lesson in the hard-sell tactics that some ISOs use when he bought Palmer Art, a framing business in Larchmont, New York, until then a cash-only business. As soon as he incorporated, unsolicited offers to process credit cards came flooding in. They tried to entice him, he said, with “trips to the Bahamas and a $1,000 signing bonus.”
He turned instead to his bank, the Wachovia Corp., which recommended Nova Information Systems Inc., a large payment processor. He chose Nova for its competitive rates.
Relying on his bank was a smart move, said Diane Vogt, president of the Electronic Transactions Association, a trade group in Washington. The bank where the business has its accounts, she said, “may have programs or relationships or is associated with an ISO.” Alternately, she said, trade organizations or other industry groups can sometimes recommend a company.
Once a credit-card terminal is in place, even the smallest sale sets off a chain of complicated and sometimes costly transactions that can whittle away at the bottom line. Fees vary by the size of the business, length of time open, the industry and whether charges are done in person, by phone or online.It is up to the “acquirer” -- the bank, payment processor or ISO -- to establish the actual rate the merchant pays. A small business may pay less than 2 percent of each sale, but have additional transaction fees on top of that base rate. Rodriguez, for example, pays 1.79 percent plus a fee of 32 cents for each sale.
But even more fees can follow. Rodriguez, like most businesses, pays extra when he manually types in an account number on the terminal rather than swiping the card. In his case, 2.66 percent of the purchase price plus a fee of 42 cents. For a $300 framing job, he would have to give $8.40 to his payment processor. “Right now, I have three loans that I am carrying,” he said. “When you add a couple hundred of dollars a month in credit-card fees, it’s an expense I could do without.”
The credit-card companies and banks charge these higher rates because they consider transactions in which the card is not electronically read to pose a greater risk of fraud. The higher fees are intended to cover the cost of “charge-backs,” a refusal to pay by credit-card holders either because the card use was unauthorized or the purchase was returned or was defective.
These higher rates do not provide a merchant protection program.
VERIFICATION
The major credit-card companies are, however, seeking to change the landscape with programs that essentially require personal identification numbers to be punched in when a credit card is used, said Jim McCarthy, Visa’s senior vice president for emerging products.
Visa has introduced a program, Verified by Visa; MasterCard has a similar effort, SecureCode. And American Express has an address verification program to protect merchants from fraud.
Figuring out the best deal for leasing a credit-card terminal is another aggravation for retailers setting up credit-card terminals. Leasing fees range widely; while Rodriguez pays $26.74 a month for his machine, Susan Foxworth, coowner of the Write Selection in Dallas, says she pays no rental fee to Cynergy Data, the New York payment processor that her store uses. Paul Martaus, a consultant who is based in Mountain Home, Arkansas, says business owners should “never pay $50 a month for a credit-card terminal; you can get a lease for $20 a month.”
Merchants who try to save by not accepting any of the big three...
You can read the rest of the article here:
http://www.abs-cbnnews.com/NewsStory.aspx?section=FOCUS&oid=68923
Best Regards,
Curtis Arnold
Board Monitor
U.S. Citizens for Fair Credit Card Terms, Inc.
http://www.cardratings.com
501-663-0314 PH
501-301-8474 FX
View our latest credit card ratings!
Board Monitor/ Administrator
Joined: 05 May 2003
Posts: 550
Posted: Thu Feb 24, 2005 8:52 am
Post subject: Tips on Accepting Credit Card Payments for Your Business
Following is a great article that appeared recently on abs-cbnnews.com that contains consumer tips on choosing a merchant credit card payment processor. Enjoy!
Merchants pay for right to use credit cards
The challenges that face business start-ups are familiar enough: scraping together start-up capital, hiring talent, fighting government red tape, recruiting customers. But pity small retail shops. For them, and other small businesses that rely on foot traffic or the Internet, a big frustration is getting a credit-card terminal up and running.
It is not a simple task. MasterCard and Visa require small businesses to enroll through intermediaries like payment processors, financial institutions or independent sales organizations, commonly referred to as ISOs, which solicit business through telemarketing and even door-to-door agents.
As new business owners soon learn, the process can entail analyzing dozens of seemingly incomparable offers that include varying terms for leasing the terminals, for accepting or rejecting credit and for issuing monthly statements, to name just the most basic services. And different intermediaries make funds available anywhere from 24 to 72 hours after a sale is made.
Last fall, Carlos Rodriguez got a quick lesson in the hard-sell tactics that some ISOs use when he bought Palmer Art, a framing business in Larchmont, New York, until then a cash-only business. As soon as he incorporated, unsolicited offers to process credit cards came flooding in. They tried to entice him, he said, with “trips to the Bahamas and a $1,000 signing bonus.”
He turned instead to his bank, the Wachovia Corp., which recommended Nova Information Systems Inc., a large payment processor. He chose Nova for its competitive rates.
Relying on his bank was a smart move, said Diane Vogt, president of the Electronic Transactions Association, a trade group in Washington. The bank where the business has its accounts, she said, “may have programs or relationships or is associated with an ISO.” Alternately, she said, trade organizations or other industry groups can sometimes recommend a company.
Once a credit-card terminal is in place, even the smallest sale sets off a chain of complicated and sometimes costly transactions that can whittle away at the bottom line. Fees vary by the size of the business, length of time open, the industry and whether charges are done in person, by phone or online.It is up to the “acquirer” -- the bank, payment processor or ISO -- to establish the actual rate the merchant pays. A small business may pay less than 2 percent of each sale, but have additional transaction fees on top of that base rate. Rodriguez, for example, pays 1.79 percent plus a fee of 32 cents for each sale.
But even more fees can follow. Rodriguez, like most businesses, pays extra when he manually types in an account number on the terminal rather than swiping the card. In his case, 2.66 percent of the purchase price plus a fee of 42 cents. For a $300 framing job, he would have to give $8.40 to his payment processor. “Right now, I have three loans that I am carrying,” he said. “When you add a couple hundred of dollars a month in credit-card fees, it’s an expense I could do without.”
The credit-card companies and banks charge these higher rates because they consider transactions in which the card is not electronically read to pose a greater risk of fraud. The higher fees are intended to cover the cost of “charge-backs,” a refusal to pay by credit-card holders either because the card use was unauthorized or the purchase was returned or was defective.
These higher rates do not provide a merchant protection program.
VERIFICATION
The major credit-card companies are, however, seeking to change the landscape with programs that essentially require personal identification numbers to be punched in when a credit card is used, said Jim McCarthy, Visa’s senior vice president for emerging products.
Visa has introduced a program, Verified by Visa; MasterCard has a similar effort, SecureCode. And American Express has an address verification program to protect merchants from fraud.
Figuring out the best deal for leasing a credit-card terminal is another aggravation for retailers setting up credit-card terminals. Leasing fees range widely; while Rodriguez pays $26.74 a month for his machine, Susan Foxworth, coowner of the Write Selection in Dallas, says she pays no rental fee to Cynergy Data, the New York payment processor that her store uses. Paul Martaus, a consultant who is based in Mountain Home, Arkansas, says business owners should “never pay $50 a month for a credit-card terminal; you can get a lease for $20 a month.”
Merchants who try to save by not accepting any of the big three...
You can read the rest of the article here:
http://www.abs-cbnnews.com/NewsStory.aspx?section=FOCUS&oid=68923
Best Regards,
Curtis Arnold
Board Monitor
U.S. Citizens for Fair Credit Card Terms, Inc.
http://www.cardratings.com
501-663-0314 PH
501-301-8474 FX
View our latest credit card ratings!
posted by CardRatings.com at 10:21 AM
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