Lower your small business credit card expenses

Posted on December 17, 2007
Filed Under Advice, Business Credit Cards | Leave a Comment

First, figure out the average rate you’re paying and the terms of your contract. To calculate your average rate, add the daily and the month-end debits and divide by your number of payment-card sales.

If your current contract lets you bail out without penalty, shop for alternatives. An Internet search for “merchant acceptance” will turn up a long list of providers. Also try your bank or local branches of national banks. Discount warehouses such as Sam’s Club and Costco offer card-processing contracts. And your trade association or chamber of commerce may have special deals.

When talking with a processor, ask about the two different types of transaction fees – fixed monthly fees and the percentage fee per transaction.

Businesses with lots of small transactions should avoid monthly fees designed to penalize that. Entrepreneurs anticipating a small number of large transactions need to focus on transaction percentage fees.

All should ask for the “fully loaded discount rate,” a figure that combines the transaction percentage with an approximate breakdown of the cost per transaction of the other monthly fees and surcharges. Ask how the fully loaded discount rate differs for signature debit cards, standard credit cards and rewards credit cards.

Also, ask about any fixed monthly costs.

Finally, negotiate. Most processors are hungry enough to make adjustments.

Ask the processor for paperwork from businesses similar to your own to review. And make sure your fees will be itemized by card type.

Ask for five local customers as references.

Before signing, make sure you understand all terms in the contract. Get the details of when and how you’ll receive your money; the average time from transaction to receipt of your funds is about two days, but it can take longer. Also find out what equipment you can use and whether you will have to buy or rent it. The length of the contract is particularly important. Try to keep it short since early-cancellation penalties can cost thousands.

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