Qualified rates come from when a customer meets a processor’s criteria for the easiest, most secure transaction (swiping/inserting a card in-person), while the other tiers-which cost more-come from having to key-in the card’s details, or when a customer pays online. Tiered : A tiered model puts credit card transactions into several categories-qualified, mid-qualified, and non-qualified.Subscription : This model uses a monthly membership fee and adds a flat fixed fee per transaction on top of that.Interchange plus pricing : That’s a small fixed fee (between $0.10 and $0.50), plus a percentage of each purchase (between 1% and 3%).There are a few different pricing models to consider, however: The truth is, most payment processors will charge similar fees-transaction fees are typically between 2%-3%, with online processors charging a bit more. Most payment processors charge a monthly fee and a transaction fee, as well as an initial set-up fee. Speaking of fees, the prices that your payment processor will charge you are of course an important consideration. What payment fees are you willing to accept? The more transactions you have, the more favorable your transaction fee. Most others are best suited for B2C companies, where you will likely be charged monthly fees plus fees per transaction. Some payment processors are better suited for B2B companies-which send invoices to clients-by offering them free online money wiring. Are you a B2B or B2C business?ĭo you sell primarily to other businesses, or to customers? If you have poor credit, a history of chargebacks, a limited time in business, and/or operate in a risky industry, processors are more likely to assess you as high risk. Businesses that are more liable to experience fraudulent charges and chargebacks are considered high-risk merchants, and will receive an account that charges higher fees, with a longer contract, and other factors that could cost you. To obtain a merchant account, you’ll provide business and tax information and submit to a credit check so the payment processor can assess your potential risk. This way, you’ll get your funds quickly, while your processor waits to receive the actual funds from the issuing bank. A merchant account is where funds from your customers’ transactions go before they are sent to your business bank account. When you sign up for a payment processor, your provider will issue you a merchant account. Most payment processing companies can offer you both types of solutions, but their services vary-so deciding on whether you need one or both options will dictate your solution. In-store processors don’t require a payment gateway, and they may come with a POS if you require one or want to upgrade from a traditional system to something more tech-savvy. These gateways are a security measure that protects all parties involved. Online payment processors will also come bundled with (or will require you to add-on) a payment gateway, a software application that plugs into your ecommerce platform to allow for online payments. In order to pick the best payment processor for your small business, consider the following factors before making a decision: Do you need a payment processor for in-store or online transactions?ĭo you run an ecommerce business or a brick-and-mortar store-or both? The answer to this question will dictate which payment processor makes the most sense for you. You may also choose to plug a standalone payment processor into your existing ecommerce business systems. It can come as part of a point of sale system ( POS ), or alongside an online merchant account. Very often, a payment processor is included in a bundle of services that a third party provides a small business. When your customer swipes their card, the payment processor takes care of encrypting their information, sending that information on to their bank for confirmation, and finally to your bank. In order to accept credit card payments as a merchant, however, you’ll need a payment processor.Ī payment processor is an intermediary between your business and the financial institutions involved in a transaction. Plus, cash isn’t an option when paying online. For customers, using a card is more convenient, and can help them rack up reward points. If you’re a small business owner, you likely already know the importance of allowing customers to pay by credit card or debit card, rather than cash.Īccording to the ACCC, just 14% of respondents to a survey said they used cash for everyday purchases.
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