Credit Card Processing Buyer's Guide

Processing credit cards is an exciting venture for your business, by which new areas of growth and revenue will be opened to you. However, the process can be confusing especially for business’ that are entering into the world of credit card processing for the first time. This article is designed to be a guide to explain the basics of credit card processing.

Choosing a credit card processor

When selecting a credit card processor, there are a few important services that the company you choose should provide. You will need a merchant account, provided by a financial institution, to process credit cards. A merchant account underwrites all credit card transactions.

An Internet merchant account allows your business to accept credit cards such as Visa, MasterCard and American Express over the World Wide Web. This service takes the money from your on-line customer and places it into your bank account. It’s important remember that not all institutions provide Internet credit card processing services. So, if Internet commerce is important to your business, choose a provider that offers this service.

Make sure that the provider you choose offers thorough customer support. It is essential to be able to receive technical support when you need it. Aspects of customer support to look for are 24/7 phone support, warranties, replacement services, training manuals, and service contracts.

Lastly, like any business, make sure that the provider you use is a reputable lender. Investigate their offers by reading the fine print and ask for references to ensure that the company is legitimate.  Always make sure you have an actual address phone number for the provider. Be suspicious of providers that use free email addresses like hotmail or gmail.

Types of credit card processing

There are several types of institutions that provide credit card processing. Here is a list and brief explanation of three of the most common.
              
Bank
Using a bank to process credit cards has many benefits. Perhaps the biggest benefit is that they usually offer total packages that cover every end of credit card processing and tend to offer competitive fees and rates. However, banks are very thorough with their screening processes and tend to be selective.

Third Party Processor
With using a third party processor, you are essentially outsourcing your transactions to a firm that handles all the details such as credit card information and customer identities. This is ideal for merchants who only process small volumes of credit card transactions.

Independent Sales Organization (ISO)
An independent sales organization (ISO) is a credit card merchant broker that represents third party processors. Basically, they set up a merchant with a provider, but do not actually handle any of the processing. Although they tend to have more lax requirements for merchants, their fees tend to be higher. Additionally, they are not as closely regulated as banks so take extra caution when using an ISO.

Costs

There are many costs and fees associated with credit card processing. These costs vary from institution to institution, but here is a breakdown of the general costs you will be incurring.

The application and setup fee is a one-time fee that covers the cost off processing your application and setting up a file for you.

Next, is the hardware fee. This varies according to the plan you choose and whether you decide to rent, lease, or buy.  Additionally, some institutions offer higher transactions fees to pay off the equipment.

A programming fee is a one-time fee that applies to merchants who are switching from one provider to another.

Transaction fees are that are deducted from every transaction. This varies with what services are attached to transaction process, such as address verification services and Internet transactions.

Chargebacks are an expense that is very costly and something you want to avoid. Chargebacks are when a customer refutes and returns a transaction. Merchant providers usually attach high penalties and fees to merchants for these occurrences.
                                                  
Now that you have the basics of credit card processing, it’s time to shop around for the best deal for you and your business.