A new business owner just getting starting is probably thinking about setting up his shop and getting all his ducks in a row. One of the first things you should think about is setting up a merchant account for your company. This account is how you will pay most of your bills and deposit most of your earnings once you open. There are several things to look for when inquiring about merchant services for your new business. Here are the top five things to consider when looking for a merchant account:
Credit Card Processing Fees
These credit card processing fees, also called an Interchange rate, are what you get charged when you use a credit card machine to process a transaction between yourself and your customer. This fee is taken right from the total of the charge. For example, if a customer uses their credit card for a $1,000 purchase, and your fee is approximately three percent, then you would have a total of $970.00 deposited into your account.
Individual, Daily or Monthly Interchange Fees
In addition to the above processing fees, you are probably going to want to know if the bank you are using will be charging on a per transaction basis, daily basis or a monthly basis. Each type of fee processing allows you different degrees of control. If you do not want to wait for the entire month, or even a day, then individual is fine, but some merchants prefer to have it all lumped at one time so they can see daily or monthly income results.
Credit Card Equipment Leasing
In order to allow your customers to swipe their credit cards, you are going to need a card machine that allows for it. It is much easier these days to just use tablets and phones with small devices attached to them. However, many customers still prefer the larger units. You could buy your own, or it is common for some institutions to offer them on lease. You should weigh carefully whether purchasing is better for you than leasing as leasing can come with higher long-term costs.
Monthly Minimum Balances
Some banks require that you maintain a monthly minimum in your accounts, or you will accrue additional fees. Make sure you understand exactly how much, if any, the minimum you need to hold in your account. Some might also consider this a monthly minimum transaction fee. This means you need so many transactions in a month, or you’ll be charged.
One of the bigger charges or fees to your account is the annual percentage rate that you are charged. These can get pretty high and should be one of the first things you seek to get waived before opening an account with any institution.
Once you understand these things, you have a good understanding of the basics and should be fine to start looking for a merchant account for your business.