Businesses are going global these days. Entrepreneurs prefer to accept credit cards online these days. It helps businesses in capturing a larger sales footprint. If any business accepts credit card online, then they can certainly address a bigger audience. Organizations are not restricted to a single store location. Companies can load thousands of products on an E-commerce website. Is it so easy to accept credit cards online now? In this details article, You will understand the fundamental factors that will impact Credit Card processing for your business. This article will also give you information about how to choose the correct payment processor for your business.
Rates Involved In Accepting Credit Cards Online These Days.
Credit Card processing is a service that is offered by Financial Institutions. No service comes for free, and that is why credit card processing companies make money on transactions. It is vital for any entrepreneur or merchant to identify the various type of charges they will be paying for credit card transactions. Let’s look at each of these charges individually.
- Merchant Account Setup Fee.
Processing companies may ask the merchant to pay for a setup fee. Most processing companies offer free setup of the payment gateway and merchant account. They do this because they keep faith in the merchant business and assume future revenue generation. Please note If it is a High Risk Merchant Account then setup fee may be mandatory.
- MDR – Merchant Discount Rate.
This is a fixed percentage that is charged by the Credit Card processing company on each transaction. The MDR can vary depending upon the type of fees setup. In the payment processing industry there three pricing models. Tiered pricing, Flat Pricing and Interchange Plus Pricing.
- Tiered Pricing Model. As you must be aware, there are different credit card brands and all the brands have different fees set for transactions. Particular brands can also have separate fees for a separate type of card. This model can be sometimes confusing for startup merchants.
- Flat Pricing Model. As the name suggests the processing company will charge a fixed transaction fee to the merchant no matter what card brand he is processing. This pricing model is quite popular in economies like USA, India, Thailand, Philippines and the European Union.
- Interchange Plus Pricing Model. As mentioned above in the tiered pricing model description that different card brands may have different pricing for transactions. In the interchange plus pricing model, the processing company decides a fixed markup that is added to the interchange price. This means the merchant will be paying the exact interchange fees plus the markup set by the Credit Card processing company.
- Per item fee.
Apart from paying the merchant discount rate(MDR), the processor may also fix a per item fee. This is usually a fixed currency value that is added to the MDR on each transaction. This may also apply to declined transactions. Most High Risk Merchant Accounts come with a per item or per transaction fee.
- Gateway Fees.
Your Credit Card processing company may charge a fixed Gateway fee on your monthly statement. This can be considered as the rental fee of your Gateway that you pay on each calendar month.
- Chargeback Fee Or Chargeback Penalty.
Credit Card processing companies and credit card brands always try to reduce the possibilities of chargebacks. Higher chargebacks mean high credit risk. Your Credit Card processing company may charge a fixed dollar amount on each chargeback.
- Return Or Refund Charges.
Processing companies may charge a fixed dollar amount on each return or refund transaction. This may apply to both type of refunds(full and partial refund).
- Pre-dispute Alert Fee.
This fee may be charged if your processing company utilizes some sort of chargeback alert service at the gateway level.
- Wire Or Settlement Charges.
For international merchants, weekly wire fee or remittance fee can be applied.
- FX conversion charges.
This is applicable if the processing currency is different from the settlement currency. If yours is a domestic relationship where you use a domestic merchant account provider or domestic payment gateway provider then this shall not apply to you.
- Termination Charges Or Account Closing Charges.
Before signing the merchant account agreement read it and ensure that you are clear about the early termination charges.
Your credit card processing company will usually mention all the above mentioned charges(if applicable) on the merchant account agreement/merchant account contract. If you have any questions regarding any of the charges then you should proactively contact the Credit Card processing company. as a merchant, you should focus on negotiating with the credit card processor. Remember every customer has the right to negotiate.
So if you are interested to accept credit cards online now then send an email on [email protected] so that we can assist you.