Low Rate Merchant Account
For some business owners, getting a low rate merchant account seems to be a difficult proposition. Many business owners are afraid to see their profits swallowed up by fees and other service charges. On the other hand, a business must be aware of the fact that not accepting credit cards is severely limiting their ability to conduct business, no matter whether that be online or offline. The small cost of having a low rate merchant account is more than made up in the additional business profits it will create. The smartest action you can take is to do your own research and approach obtaining one of the many low rate merchant accounts cautiously.
Understand the Rates Which Apply to You
The first thing to understand is that not all merchant accounts (and their fee structures) are created equally. Typically, a merchant account provider will advertise their lowest rate. However, to receive this, many conditions must be met for the transaction, card, how the transaction was entered, etc… If even a single condition is missed, than a higher rate would be charged.
With any type of low rate merchant account, always ask for paperwork detailing all of the charges and how each category is defined. Then, compare this with how your business will be doing most of its transactions. Only in this fashion can you get a clear picture and compare each potential processor and the costs associated with each one.
Do Your Own Comparison Shopping
Try to find a local bank that offers low rate merchant accounts to many small businesses. Another alternative is to find an independent sales office that represents multiple providers. You may wish to ask some other (local) businesses for a number of references as a starting point. However, keep I mind that many business owners are busy doing their own business and may not even realize that the rates they think they are getting may actually not be the case at all. We have found that many business owners never bother to check their monthly credit card processing statements to actually calculate the rates they are actually paying which in many cases end up being far more than what they thought they were being charged in the first place. So take any recommendations with a slight grain of salt unless you can actually verify their claims by looking at their statements and dividing the total fees that were paid into the dollar amount of the transactions done for that month. Only then can you really know how much that merchant is being charged.
The internet can also be a helpful resource for doing your own comparisons. However, make sure you read all of the fine print. If a deal looks too good to be true, it probably is.
Understand and Evaluate Recurring Fees
Many of these low rate merchant account providers charge additional and even recurring fees. Sometimes there will be a monthly minimum fee. This means that even if you did not process a single credit card payment, you will still be responsible for paying the merchant a $15-$35 minimum fee.
In other cases, you may be required to pay a set up fee, or an annual fee. Not that there are anything wrong with charging extra fees; but you should make sure that you understand exactly what you will be responsible for.
Consider the Contract Itself
With many low rate merchant accounts, you will be required to sign a contract. These will very often commit you to a period of 3-5 years. There may also be hefty termination fees if you wish to break the contract. Make sure you understand exactly what these terms and conditions are. It is also strongly suggested to have an accountant and/or an attorney look at these contracts before you sign.