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Five Ways the Right Merchant Processor Can Save You Money

An often-overlooked segment of running a business is fully understanding the nuances of credit card processing. It can be confusing, but will have a significant impact on your bottom line.

It is common for a business to accept one of the first offers they receive when initially setting up a merchant account, and think they’ll go back and revisit the pricing once they are up and running. Unfortunately, it is even more common for a business to end up remaining with that original company because of misunderstood contracts, terms or conditions. Besides, all providers offer relatively the same thing, right? No - not even close. If your provider isn’t willing to help you understand your costs and thoroughly explain your pricing model, it might be time to think about a different option.

Below are five steps you can take to see if you are with the right processor:

1. Research early

Chances are that when you first registered your business, you were barraged with a multitude of calls from merchant service providers offering you the ability to accept credit cards and other forms of electronic payments. If you took one of these offers without investigating your other options, you may be paying much more than necessary for your credit card processing. The best advice is to shop around. With an abundance of payment processors in direct competition with each other, you are sure to find several good options.

2. Find out if your rates can be lowered

Your first step doesn’t necessarily have to be finding a new merchant services company. Most of the time, your provider should be willing to review your current processing environment and help you understand where a potential reduction of expenses may be possible. This will include a review of how your transactions should be qualifying at optimal interchange rates, avenues for becoming PCI compliant, etc. However, if they flat out refuse to conduct a review, that should be a red flag. It is not always possible to lower your existing merchant fees, but a company that will not even do a review of your current operating environment is exhibiting poor business practices or may have something to hide.

3. Be wary of offers that sound too good to be true

Many times, merchants are pulled away from their existing providers by rates that seem much better that what they are currently paying. Later, they find hidden or extra fees in their contract, or find that their contract can’t be broken without substantial penalties. If the rate you are being offered is considerably lower than others you’ve been quoted, or they offer to waive any transaction fees, you should be wary of the offer.

4. Know your business accountant

Some accountants may have personal relationships with payment processing companies, especially if the accountant manages multiple businesses. And occasionally, these accountants receive kickbacks for referring new merchants, or for retaining their businesses with the same merchant services company. Obviously, this isn’t always the case, but just something else to help keep your best interest in mind.

5. Understand the different pricing structures and determine what will work best for you

In broad strokes, the main pricing models are differentiated by the way your merchant account provider handles the wholesale cost of processing (what it must pay to other entities in the processing chain) versus its own markup. There are two separate types of wholesale costs — interchange fees and card association fees, but the differences between pricing models mostly center around how interchange fees are handled.

Do the terms “interchange-plus” or “bundled” sound familiar? Hopefully so because this means your processor has likely explained the differences to you. These are the main two types of pricing structures with each offering a unique view into transparency and monthly statement clarity. Take a look at this short video for key insights between these two methods.

The Bottom Line: Trust your gut

If a company makes you uneasy or you feel like they aren't being honest with you, trust your instinct. Shop around and investigate the company. With a myriad of providers out there, you should be able to find the perfect fit for your business.

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