subject: Merchant Services: What Every Small Business Needs To Know [print this page] Many Americans have been able to monetize their natural skills by opening a small business. Whether they are retailers, service providers, or web-based entities, these entrepreneurs are utilizing their personal expertise to fill a need in the marketplace. Small business owners have the potential to become very well compensated for their time and effort. However, acquiring this compensation means accepting their valued customers preferred methods of payment. Usually, this means welcoming credit card purchases but the terms, technology, and fees of the merchant service industry are often overwhelming to small business owners. Thats why all individuals and companies should know the basics about merchant services.
Merchant Accounts
There are several different types of arrangements, known as merchant accounts, which small business owners can obtain. The most well known is the retail account, in which the proprietor engages in a face-to-face transaction with a credit card purchaser. For businesses that accept payment via telephone, fax, e-mail, standard mail, or any other method where the credit card itself is not viewed, a card-not-present account (also known as a mail order telephone order account) is often the most appropriate choice.
Internet accounts are designed for companies that accept credit card payments directly through their websites. A mobile account is like a retail account, but is used when the business owner accepts credit card payments in places other than his or her home base location (as is the case with repairmen or building cleaning services). Finally, a seasonal account can be set up for businesses that operate for only a portion of the year, such as fireworks stands, lawn services and Christmas tree sellers.
Merchant Services Middlemen
Small business owners should also understand that there are middlemen involved in merchant services transactions. The credit card companies themselves (Visa, Master Card, American Express, etc.) supply the credit cards and govern how the merchants can accept them. But these cards are issued through certain banks (Bank of America, Chase, Citibank, etc.), that screen the cardholders and set their credit limits. Communication between the issuing bank and the merchant is facilitated by an acquirer. Member service providers, independent sales organizations, and their agents often handle the equipment, processing, and other credit card-related services for the merchant. Finally, the credit card transactions themselves are processed over platforms and networks that may be owned or operated by an entirely different company.
Merchant Services Costs
All of these different middlemen receive a fee or percentage from each credit card transaction, and these costs are usually incurred by the small business owner. There are numerous different types of fees, but most are charged per transaction, on a recurring basis, or individually if a certain situation occurs.
The most visible (and often the largest) credit card cost that merchants pay comes from the periodic rate, which is the monetary percentage of each transaction that goes to the merchant account provider. The qualified rate is the lowest rate that can be assessed on a companys transactions under a given agreement, and it usually comes with certain restrictions that must be met. If these criteria are not met, the merchant can be assessed surcharges of varying amounts or demoted to mid-qualified or non-qualified rates which are higher than the qualified rate.
The small business owner is also responsible for an interchange fee, which covers the communication networks that link the banks, credit card companies, processors, and other entities. Other costs include transaction fees (which are due each time a transaction is conducted regardless of the size) and authorization fees (which are charged whenever a business attempts to authenticate a card, even it the card is declined). There may also be monthly or annual fees associated with some merchant services accounts.
Merchant Services Transaction Information
Though most of the information mentioned so far is not relevant to the employees who actually conduct the transactions, there are some areas that a small business owner must review with his or her cashiers, clerks and salespeople. These individuals should know the difference between a consumer credit card and a debit card. Though these cards look the same, a debit card requires a Personal Identification Number (or PIN) to be entered by the cardholder, and the funds are immediately taken out of the persons bank account. Furthermore, a purchasing card can only be used at certain businesses (these are also known as gift cards). Also, payment acceptors must know how to perform credit card transactions other than common purchases. They must be able to issue refunds, which involves transferring funds from the merchants account to the cardholders account. Front-line employees should also know how to void transactions, which means cancelling purchases already received in the event of an error or a customer changing his or her mind.
Merchant Services Payment
Finally, the small business owner must be aware of the process by which customers funds travel to the companys bank account. Periodically (usually at the end of each day), a group of transactions (known as a batch) is transferred from the business to the processor via telephone, Internet or dedicated terminal. After this occurs, the small business owner usually receives the money within two or three business days. If the processor has a close relationship with the businesss bank, the lag time may be as short as 24 hours. Sometimes, various fees are subtracted from the batch totals before the money is deposited into a bank account.
It is important for small business owners to select the type of merchant services account that is right for them, and then learn all the processes, fee schedules and requirements associated with the arrangement. Companies should try to allow at least two or three weeks from the time of application to the first use of the merchant services account. Once the account is functioning properly, the small business owner can look forward to reaching a greater number of customers and increasing his or her revenue as well.
by: Bankcart
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