Affordable Merchant Account - Review Credit Card Processing Options Carefully!

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					Affordable Merchant Account – Review Credit Card Processing Options Carefully!

Written By: Andy Lax –

In these recessionary times, savvy business owners are always looking for bargains and
for those who need credit card processing options, an affordable merchant account
may be the holy grail to lower operational expenses. But with hundreds, if not
thousands of merchant account providers to choose from, how can one find these
affordable merchant accounts when all are proclaiming to offer the best rates?

In order to find a credit card processor that does not break the bank, keep the following
questions in mind:

What are the TOTAL fixed costs? - This question is particularly pertinent when
opening an online / Internet merchant account. For example, Company A quotes a total
monthly fee of $15 where Company B asserts that their monthly service fee is $5.
While it appears that Company B is offering the better deal, they neglected to mention
that their payment gateway is also $15. (The gateway is the mechanism that one needs
to integrate with the website's shopping cart or order page to facilitate the transfer of
funds between customer and merchant.) Thus, the TOTAL monthly fee of Company B
is the following: $5 + $15 = $20 – higher than Company A's price per month.

What are the credit card processing discount rates and transaction fees? - Notice
that I mentioned “discount rates” and “transaction fees” in the plural form rather than in
singular designation. Many self-proclaimed affordable merchant account providers
will only quote their qualified discount rate and transaction fee.

Consider the scenario where Company A and Company B are again vying for a
prospective client's account. Company A quotes the qualified, mid-qualified, and non-
qualified pricing structure – all applicable for this retail merchant. (Please access this
blog entry for further information on these tiered rates.) Company B only quotes the
qualified discount percentage and transaction fee tier – and at a better rate than
Company A. However, Company B neglects to report to the merchant the mid and non-
qualified surcharges – fees that may be much higher than their counterpart's rates.

What are the incidental (or worse … hidden) fees? We recently lost a potential
account to a company that purportedly had a lower TOTAL monthly fee. However, this
merchant did not seem to investigate the host of “nickel and dime” fees, such as the
batch, AVS, and Watts fees – all of which we waive. These small fees can add up in a

Affordable Merchant Account – Review Credit Card Processing Options Carefully!
© 2010
hurry so the proverbial apples to apples must be compared. (I often discuss such credit
card processing fees in my blog.)

Is there a monthly minimum? - The affordability of a merchant account may be
compromised by a monthly minimum fee. Here, the merchant must do a minimum
amount of processing volume or face an additional fee. (Many companies impose a
monthly minimum fee of $25.) In the scenario where a merchant does not do any
processing for the month, the merchant will have a new TOTAL monthly fee – increased
by $25, the monthly minimum charge.

By the way, if the merchant does $1,000 in processing for the month and the discount
percentage is 2%, then the merchant receives “credit” of $1,000 x .02 = $20. If the
monthly minimum was $25, this merchant would owe, $25 - $20 or an additional $5 for
that month.

Is there a termination fee? - Regardless of how cheap a merchant account appears, any
termination fee may be too steep a price to pay. Many processors impose a three year
contract and assess a termination or cancellation fee if the business owner closes the
account. What happens if a merchant just cannot make a go of the business and decides
to close the doors, say after two years? He/she will be hit with this penalty fee and this
once affordable merchant account becomes expensive very quickly.

How is the customer service? - Yes, the rates are the be-all, end-all, but if a company
provides poor service, you will be paying in the form of time. You may spend countless
hours trying to get answers to your questions. Who can afford to waste time in these
hectic times?

Do you even need a merchant account? - There are third party processors, such as
PayPal that may offer the better deal for the very small merchant as they have a program
to waive monthly fees. However, merchant accounts offer many benefits over their third
party processing counterparts (e.g., more professional look, less likelihood of frozen
accounts, lower discount percentage rates, etc.). It may pay to perform a cost
comparison between a full service merchant account provider and a third party

Keep the seven aforementioned questions in mind when looking for the cheapest, if not
best, vendor. An affordable merchant account may be a click away.

Affordable Merchant Account – Review Credit Card Processing Options Carefully!
© 2010

Description: There are a myriad of credit card processing companies available in the quest to find an affordable merchant account. By considering the questions posed in this article, any merchant will find the proverbial needle in the haystack and locate the cheapest -- dare I say, "best" -- vendor. Read this article before selecting a merchant account provider!
Andy  Lax Andy Lax Account Manager
About My grandfather always said, "There are those who know and those who don`t . . . and it`s as simple as that." In my professional and personal life, I always aspire to "know" and do what`s right. For the last eight years, I`ve served as an account manager for a credit card processing company. I truly love my job, particularly the aspect of speaking with people all over the country and helping merchants as they need to acquire an important service, indispensable to their business operation. In my home life, I`ve been blessed to share my life with my wife, Jackie, and two wonderful children, Matt and Scott. To learn more about me (if insomnia is a problem :)), please see: