Accepting credit card payments is a necessity and daily activity for business owners. While most small business owners don’t think much while choosing a payment processor, overlooking some very simple safety risks often proves to be a big mistake.
These business owners often sign up immediately after receiving the first offer from a payment processor. Ultimately, various factors including a confusing price model makes them end up paying too much for credit card processing for their small businesses.
The most common issues these businesses face on a later stage, include stolen customer information, fines, revoke credit card privileges, and ultimately, lost revenue.
So, if you too are looking for a payment processor, there’re some common mistakes made by business owners that you should know about:
1. Getting into a Long Contract with Early Cancellation Fees
When you sign a processing agreement form, you agree to get into a binding contract with your processing company. Almost every big credit card processing brand has a fixed contract term. Though this duration may vary depending upon a lot of factors, most processing companies design their contracts to make maximum profit!
On an average, while a contract stretches three to five years, many good providers have month-to-month terms also. Most providers have an early termination fee that depends upon your monthly fee. For example, if you are signing up for a 3-year contract and want to terminate it after a year, you’ll have to pay for the next two years. So, it is always a better idea to find a credit card processor with month-to-month terms and no termination fees.
2. Making a Volume Commitment
Many credit card processing contracts involve a clause about volume commitments. According to this clause, you agree to process a fixed amount of dollars each month. In case are unable to complete your promised volume, you are most likely to face higher discount rates and other penalties.
Large enterprises often negotiate lower discount rates, but nearly all small and mid-sized businesses get hit by this practice. In order to prevent this from happening to you, you should carefully read all the clauses before signing up the contract.
3. Getting as Merchant Account from a Bank
Most small businesses want to save money by signing up for high risk merchant accounts through their banks, considering that they process payments themselves. In reality, however, the banks partner with payment processors doing underwriting and back-end processing. This makes you pay more than you should and besides, this allows the bank to take money through your processing as well as freeze your account. The best idea will be to go for a third-party high risk merchant account providers who can offer more economical deals.
4. Taking a Decision on the Only Basis of Price
Prices and rates isn’t the only consideration while choosing a credit card processor. You should also look for other facilities such as customer services, quick deposits, uptime and eCommerce features. Make sure your provider is offering mobile payments services, so that you can accept cards on a smartphone.
Consider comparing multiple credit card processors before deciding on any one. Remember, the cheapest may not always be the best!