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Credit
and Debit Card Fees
How to Avoid Surprises
By
Todd S. Whiton
MAY 2008 - E-commerce
has created an explosion of options for small businesses that want to accept
electronic credit and debit card payments. Small businesses continue to
be the driver for new job creation and economic growth in the United States.
Small-business owners
should expect competitive and transparent pricing and terms when analyzing
an electronic payment–processing agreement with a vendor. Owners
should focus on the following:
- The agreement
should reflect a rate structure that matches how the business conducts
its payment processing. For example, a merchant set up with a “Retail”
or “Swiped” category rate structure but that does all of
its payment processing online will pay a higher rate on every transaction.
- The rate for
check-card processing should always be lower than the rate for processing
a credit card.
- In a “swipe”
environment, debit cards should be accepted with a PIN pad to lower
costs.
- Do not pay an
application fee, a termination fee, an annual fee, or any kind of surcharge.
- Terminals should
be fairly priced. Wireless terminals should cost no more than $1,000.
Other terminals should cost no more than $400 to $500.
- Look at card
acceptance inclusively; add all fees together (discount rate plus fees)
and divide by total sales processed to get an all-inclusive rate. Except
for some high-risk merchants, this rate should never be more than 3%.
Todd S.
Whiton is president and CEO of Capital Payments, LLC (www.capitalpayments.com).
Adapted with permission from the whitepaper “The Dirty Little Secrets
of Merchant Services,” copyright January 2008.
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