In order to assist you avoid some of the biggest issues that businesses encounter while they’re in the market for a merchant account, we’ve put together the following ten questions to ask potential merchant service providers.

1.) Where can I examine the categories, rates, and fees for interchange?

Before learning about interchange costs, don’t start looking for a selling merchant services. The majority of the fees associated with processing credit cards that you will incur are interchange fees, and all merchant service providers charge the same rates for these fees. Interchange might be compared to wholesale processing charges.

The websites for Visa and MasterCard each have comprehensive interchange charge schedules. Before you begin comparing rates and fees, be sure to read through these price schedules and have a fundamental grasp of interchange.

2.) What kind of pricing model does this merchant account employ?

Different price models that affect interchange fees differently are used by merchant service providers. Tiered, interchange plus, and enhanced recover reduced price are the three main varieties (ERR). Interchange Plus is the most direct of these three and has the potential to be the least expensive (provided that rates are reasonable).

3.) Once I start processing, what should I do to get the best interchange rate?

The struggle does not end with obtaining low rates. The other part is making sure that your transactions qualify for the lowest interchange category as frequently as possible. Instead of the markup from your merchant service provider, interchange fees make up the majority of the costs that you incur to process credit cards. When you’re up and running, ask your provider how they plan to ensure that you can attain the lowest interchange charges.

4.) Is there a daily or monthly settlement for this merchant account?

In the case of daily settlement, merchant account fees are subtracted from the total amount processed before you are paid. For instance, if you charged $100 to a customer’s credit card, you would conclude the day with $97.50. This represents the gross charge less any processing fees. (For this case, we calculated a 2.5%)

Gross deposits are made to your account over the course of the month with monthly settlement, and charges are deducted all at once at the conclusion. Monthly settlement is obviously better for cash flow because you keep your money for longer.

5.) Will I own the equipment outright or is this a lease?

Don’t rent equipment for credit cards. For $300 or less, the majority of credit card machines may be bought brand new. Leases bind you to a four-year or longer contract and come with exorbitant markups of at least 1,500%.

6.) Is the machinery you’re advising proprietary?

Certain proprietary credit card machines can only be used with a specific processor. Because proprietary equipment makes it more difficult for you to transfer to a different processor in the future if you’re offered cheaper rates and fees, merchant service providers will typically advocate it.

7.) Is there a penalty for canceling?

Your signing a merchant account agreement with a cancellation fee has no benefit. Cancellation fees are advantageous to the supplier since they essentially ensure that you will continue doing business with them for the duration of the contract. Pay close attention to any cancellation fees in merchant account applications and demand that they be eliminated.

8.) What is the minimum payment per month?

A monthly minimum is more of a baseline than a charge. The minimum payment due each month ensures that the provider will earn a predetermined sum from your account each month. If your monthly fees fall short of the required minimum, you will be responsible for paying the difference. Never accept exorbitant selling merchant services. Inform the salesman that you want the fee waived or reduced.

9.) Is there a yearly charge?

A yearly charge is common for merchant accounts. You receive no benefit from paying your merchant account provider a large annual charge. Ask the salesperson for your merchant account if there is an annual charge for the account. If so, insist on its cancellation.

10.) Do you charge a fee for PCI compliance?

All retailers should treat the Payment Card Industry (PCI) Data Security Standard (DSS) seriously and work to comply with it. To ensure that merchants have done this, Visa and MasterCard do not impose a fee.

There are expenses associated with this procedure, and sales agents and independent sales offices (ISO) go to tremendous efforts to ensure that their merchants become and remain compliant. To address this additional cost, many merchant service providers have created monthly or yearly PCI compliance fees; however this is arguably just a cost of doing business.

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