Merchant Services

Merchant Services allow businesses of all type to accept credit card or debit card payments for their goods and services. Most consumers today carry eight or more credit cards and prefer to pay with this method rather then carrying cash or writing checks. Credit card and debit cards will be used interchangeably from here on.

A brief list of transactions that can be processed via Merchant Services are: VISA®, MasterCard®, Discover®, American Express®, Diner's Club®, Carte Blanche®, JCB®, private label, electronic check, gift cards, prepaid cards, Electronic Benefits Transfer (EBT), and PIN-based debit, ATM, and former Fleet transactions.

To visit merchant services processors directly, we recommend the following:

Or, continue below to learn more about the benefits and process of Merchant Services.

Benefits:

While most consumers are familiar with credit card terminal at local retail stores, these card swiping terminals are not the only method of accepting credit cards or similar types of payments. Business owners can also accept credit cards, gift cards or even check payments by phone, online or via wireless mobile devices (which are great for trade shows or sales away from your traditional location).

Accepting these types of payments can really improve a businesses revenue and cash flow. If a consumer has a credit card but not the cash to cover the cost of the proposed purchase - and your business does not accept credit cards for payment - you could easily lose that sale. Further, it is estimated that consumer tend to both spend more per transaction and make quicker purchase decisions when paying with credit cards.

How it works:

Note: While we use the term retailer often - other businesses (like Wholesalers, VARs, Government Agencies) can and do use Merchant Servicers to process credit card sales and other transaction - when we use the term retailer we simply mean all businesses that accept credit cards and similar methods as payment for their goods and services).

Although this would seem a very simple process from the consumer's viewpoint, Merchant Services Processing can be somewhat complex involving five parties:

When the consumer swipes or provides their credit card information, this information is first stored in the merchant's terminal or processing system (this is at the retailer or business) or hand inputted by the retailer. The information is then verified by the merchant's (retailer's) processing company (companies like Paypal or Electronic Transfer, Inc.) through a card network association (like Visa, MasterCard or ACH) who then contacts and notifies the card issuer (companies like Capital One, Discover, or Bank of America) of the transaction. The issuers approves or declines the transaction (if approved - the issuers will put a temporary hold on the consumers credit balance) - then notifies the card association who forward the information that status to the retailer through the terminal or processing system. The retailer then either completes the transaction or declines the purchase.

From the retailer's perspective .

Once a transaction is approved by the issuer through the card network association and completed by the retailer - the retailer's card processor (sometimes called acquirer) will store the transaction information until the retailer batches their transactions (this could be daily or weekly). Batching is done so that the card processor can then clear the payments and return the funds to the merchant (retailer). Once the processed is batched the card processor (including any chargebacks) clears the batch with the card association who will in turn collect payment from the card issuer and distribute those funds to the card processor; who will credit the retailer and forward payment to the retailer's bank account.

Not an easy process with so many groups (companies) involved.

Keep in mind that any chargebacks can be disputed by the retailer
before being debited from their account.

What you need to get started:

Even though most businesses are different regarding how and where they accept payments, the following are usually the very basic all businesses need:

Some type of transaction system - this could be a Point of Sale terminal (POS), virtual terminal, computer processing software or a phone to call in the transactions
A Merchant Services Processor - someone to process your transaction and remit payment - the Merchant Services Provider can also provide the needed equipment to initiate the transaction
To receive payments from the processor after batching, the funds need to be deposited into some sort of business bank account

For online credit card transactions, your business will also need:

A hosted website that can process transactions securely - this could be through an ecommerce software package or in-house processing application
An online Merchant Service processor - Not all Merchant Service Providers handle online transactions but most do these days

If you want to integrate your merchant processing into your current system or have a single system to track all your transactions and batch and collect payments - you may also need a computer, cash drawer, and bar code scanner.

Fees and costs:

With each merchant transaction passing through so many hands, each one of those parties wants their piece of the action (thus, each take a small percentage of the transaction to cover their costs of the processing).

Fees can also be influenced by the volume of transactions, the size of the average transaction (the bigger the better) and the amount of chargebacks to each account. These can also vary for new businesses or business owners with bad credit.

Most merchants (retailers or other businesses that accept payment via credit cards or similar means) will face these common fees (keep in mind that all processor have their own set of fees - thus you should ask them about their individual fee schedules):

Monthly Statement Fee
Minimum Volume Fee
Discount Rate Per Transaction Dollar Amount
Transaction Fee - Regardless of Transaction Dollar Amount
Chargeback Fee
Credit Card Terminal (for Retail Businesses) - These can be bought or leased

Other possible fees (from MerchantExpress.com) could include:

PIN Debit Transaction Fees
Address Verification Service Fee
ACH Fee or Daily Batch Fee
Internet Gateway Fee
Voice Authorization Fee
Surcharge / Partially-qualified / Non-qualified Fees
Application / Setup Fee
Reprogramming Fee
Annual Fee
Cancellation or Termination Fee
Hidden Fees or Junk Fees

The thing to keep in mind is to ask for full disclosure on their fees as you talk with and compare different Merchant Service providers.

To see some averages regarding these fee amounts - please visit Merchant Services, Inc. where they break down many of these fees based on industry averages.

Additional items to look out for:

Open a separate checking account for your merchant transactions and do not keep any more money in that account then you have too. This will protect you should your processor or your bank seek to freeze your accounts - which they can do if they feel that an over abundant of fraudulent activity is happening with your account
Chargebacks and disputed charges policies
Difference in fees for cards being present and swiped or cards not present
Some Merchant Processors may require a reserve account from the business
Do your homework on the Merchant Provider you select. Ask other business owners who they use and would recommend, check with the local Better Business Bureau and make sure you read all the paperwork and fine print
Beside fees also look into how easy it is to set up and operate the system and level of customer service provided
When renting or leasing equipment - make sure you understand the terms of the agreement. Keep in mind that the processor will not tell you when the contract is up or when you have paid in full per the contract. They will just keep charging you the rental or lease fee

Based on our research and experiences, we recommend that you check out the following companies as you look for a Merchant Service Provider:

Future benefits:

Another benefit of accepting credit cards as payment is the fact that, after a short time frame, you business may qualify for a "Business Cash Advance." A business cash advance is not a loan but an advance against your future sales. You payback these advances with small portions of your future credit card sales - thus providing you capital you need now for working capital, payroll, expansion, inventory, etc an are not saddled with a fixed monthly payment as you move forward - payback is based on future sales - a slow sales month means a lower payback for that month.

Disclaimer: The content provide on this website - www.BusinessMoneyToday.com - and it's subsequent pages is for informational purposes only. You are advised to consult with a financial professional before making any financial decisions as all financial decisions are personal and should only be based on an individual's situation.
BusinessMoneyToday.com is not liable for your financial actions.

Lenders will, typically at their discretion, perform credit checks with the three major credit bureaus: Trans Union, Equifax, and/or Experian.

Business Money Today or its subsidaries does not fund loans or make credit decisions. Business Money Today is not a lenders or loan broker in any matter and does not charge for any service or product. Further, Business Money Today does not make any product or service offerings and does not constitute an offer or solicit to lend through this website.
The site will submit information provided by you to lenders and other financial service providers. Nothing on this website guarantees that you will be approved for any product listed or advertised. This service is only available in the United States; although all products may not be available in certain states, and may be changed at any time without notice.
Should you have questions or concerns regarding your applications or facilities, please contact your lender or service provider directly.
Any cash advance, factoring or similar product applied for are meant to provide short-term financing only and should not be considered a long-term solution.

Merchant Services - Business Money Today

Merchant Services

Small Business Financing Resources