Merchant Card Processing 101

If you sell products, you likely use a merchant card processing machine and software. If you don’t, you’re missing out on serious opportunity to capitalize on the tens of thousands of people who use credit or debit cards to pay for purchases.

Still, if you’re currently researching your options for merchant card processing, there are a few things you should know.

How You’ll Be Charged

When you first sign up with a merchant card processing service, you may be charged an initial fee for setup and equipment, totaling anywhere from $300 to $800. But the fees don’t end there!

This New York Times blog post put it succinctly:

“…there are four parties involved with every credit card transaction: the merchant receiving the payment (“merchant”), the bank that the merchant uses to provide processing services (“acquiring bank”), the bank that issued the card to the customer (“issuing bank”) and the customer (“customer”).”

Each one of these parties charges you a fee. Usually it’s a percentage of the sales price, as well as a fixed price per card swipe (like $.20). You may also have to pay a fixed monthly fee. It’s not a lot, but it adds up.

The Software

If you already have point-of-sale software set up, you’ll need to get your card processing service to integrate so you can have them work together. In this case, you might need an IT specialist to figure it out for you.

A Smarter Small Business Solution

All of that seems like a headache to me (and believe me: I’ve used these systems. The equipment fails, and you’re left operating on a cash-only basis until tech support calls you back).

What’s exciting to me is the arrival of smarter technology, like Square, Quickbooks Merchant Service, and Paypal Payments Pro. Rather than the bulky equipment other merchant processors provide, these allow you to affix a small card swiper to your mobile phone or tablet. Your customers can sign for their purchases, add a tip, and get an emailed receipt. You can use it on the go, which is great if you sell at markets or community events.

Fees tend to be cheaper with these up-and-coming services, which fits small business budgets nicely.

Before you sign up for a merchant card processing service, look at multiple options and examine exactly what you’ll end up paying in fees. Choose the most cost-effective solution for your small business.

Photo Credit: gingerbeardman via Compfight cc


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