Merchant Services For Small Businesses
Businesses rely on them to operate.
WHY DO SOME SMALL BUSINESSES HAVE PROBLEMS GETTING MERCHANT SERVICES?
Businesses in higher risk industries may experience issues getting merchant accounts using standard payment processors.
Some businesses are more likely to experience chargebacks or fraud because of their industries.
For instance, the travel industry is considered high risk because high value services are booked in advance. Customers cancel for all sorts of reasons, but the bottom line is that these cancellations often result in chargebacks, even if there is a no-refund policy in place.
While adult entertainment, gaming, cannabis, and other businesses are vulnerable to fraud, so are more mainstream businesses such as jewelry stores, electronics stores, or financial services. Thieves go where the money is, so any business selling high-end items could find itself hit with large chargebacks if fraudsters target their merchandise.
Businesses offering subscription-based products or services, with recurring billing, are more likely to experience chargebacks or fraud and will have difficulty finding a traditional merchant account provider.
These high risk industries must look to merchant service providers and payment processors specializing in servicing such businesses. In return, higher fees are charged by high risk merchant account providers.
Other issues that may make it hard to obtain merchant services include less than stellar business or personal credit.
Business owners must have the ability to cover the estimated number of anticipated chargebacks based on their industry or sales volume. Low credit scores are an indication that they may not have that ability.
Think of merchant accounts as a line of credit to better understand the relationship between credit scores and why some small businesses may have difficulty finding merchant service providers.
HOW CAN A MERCHANT SERVICE PROVIDER HELP SMALL BUSINESS OWNERS?
Merchant service providers make it possible for business owners to accept credit and debit cards. They provide the hardware and software necessary to conduct these and other transactions.
For high-risk small businesses, working with a high-risk merchant service provider reduces the risk of frozen merchant accounts because of excessive chargebacks and fraud. It’s the fact that such businesses are more prone to chargebacks and fraudulent activity that puts them in the high risk category in the first place.
Such a freeze is devastating to any business. Not only are you unable to accept new credit card payments, but you can’t receive income from recently processed transactions for a considerable period – weeks or more.
With Easy Pay Direct, you can receive approval and begin accepting credit card payments within just a few business days of submitting your merchant account application.
WHAT ARE MERCHANT SERVICES FOR SMALL BUSINESSES?
Ecommerce businesses need to accept credit and debit card payments.
Merchant services is the term used for all services relating to payment processing. This includes hardware and software, the virtual terminal for point of sale transactions, the payment gateway, and all other aspects of credit card and ACH processing.
The merchant account is a type of bank account allowing businesses to accept payments. Along with credit and debit card payment processing, the merchant account is used to process eChecks and other types of payments.
Those merchant accounts used for ecommerce or Card-Not-Present (CNP) transactions must integrate with an online payment gateway. For small businesses that are not accepting online transactions, a physical terminal is needed to accept payments.
Merchant services include providing:
- Hardware and software
- Payment processing
- PCI compliance
- POS systems
- Virtual terminal
Every small business is unique. The bottom line is that business owners need to process their transactions, and merchant services make that possible.
At Easy Pay Direct, we provide merchant accounts and services tailored specifically to your industry.
WHAT ARE MERCHANT SERVICE PROVIDERS?
A merchant services provider is a company that offers these services for businesses.
Although not every merchant services provider offers all of them, most will include payment processing and POS systems.
There are also companies that only offer merchant accounts, but they partner with other companies for payment processing services.
Are There Other Terms for Merchant Services Providers?
Yes. There are other terms for merchant services providers, such as credit card processors, merchant account providers, credit card processing companies, and payment processing businesses.
WHAT IS A MERCHANT ACCOUNT?
A merchant account is a bank account allowing businesses to accept payments by credit or debit card. Unless a small bricks-and-mortar business decides to accept cash only, a merchant account is a necessity.
Merchant account providers work with the business, the payment processor, and their member bank. After opening the merchant account, payment processing takes place as the processor works with the issuing and acquiring banks.
Here is the process. A customer pays for an item with a credit card, and the card processor sends the transaction to the card network. The network sends the transaction to the bank issuing the card, which either approves or declines it. If authorized, the funds are transferred to the merchant account.
Once the funds are deposited into the merchant account, the business can then receive the funds in its business account, from which it may collect the monies. The timeframe in which the card processor transfers the funds from the merchant account to the business bank account ranges from two days to two weeks.
HOW DO BUSINESSES ACCEPT PAYMENTS?
Businesses accept payments through a point of sale system (POS), a virtual terminal, or a shopping cart online connected to a payment gateway. Here’s what each entails:
POS SYSTEM
This is where the customer pays for their goods and services, whether in person or online. Many merchant service providers offer Cloud-based systems. Your business’ POS system may be tailored to your specific needs and may include hardware like credit card terminals and barcode scanners.
PAYMENT GATEWAY
A payment gateway integrates with your website’s shopping cart to process payments. There are many options available, including white label gateways that showcase your brand.
VIRTUAL TERMINAL
Payments are processed virtually via an online program. There is no need for a physical terminal. Once your business has a merchant account, you can accept credit card payments through a virtual terminal on your computer, smartphone, or other devices with internet access.
WHAT PAYMENT METHODS ARE ACCEPTED?
Merchant services providers allow you to accept credit card payments, debit card payments, mobile payments, and other payment methods such as echecks or ACH.
HOW DOES PAYMENT PROCESSING WORK?
The first stage of payment processing is transaction authorization.
When a customer purchases an item on your business website, the processor sends their encrypted payment information through a payment gateway.
The transaction is then authorized or denied.
In the next stage, the member bank (credit card company) releases funds into the merchant account.
From there, the merchant account removes all applicable fees before depositing money into the business bank account once all transactions for the day are settled.
WHAT IS THE IMPORTANCE OF PCI COMPLIANCE?
The Payment Card Industry Data Security Standard (PCI-DSS) is the standard designed to ensure that businesses maintain a secure environment in the acceptance, processing, transmission, and storage of all credit card information.
PCI compliance applies to any entity accepting, storing, or transmitting credit card data, no matter how small.
Businesses processing fewer than 20,000 Visa ecommerce transactions annually and all businesses processing up to 1 million transactions annually – whether online or through another channel – fall into Level 4 of PCI compliance. While compliance is not as arduous at this level, it is still complicated.
Your merchant services provider will ensure that your business adheres to PCI compliance. Credit card brands mandate PCI to keep data secure during credit card processing. This helps protect customers from fraud.
WHAT HAPPENS IF BUSINESSES ARE NOT PCI COMPLIANT?
Companies must stick to the industry standard. Failure to meet PCI compliance standards means risking having customers’ data breached and stolen.
A data breach is a serious matter. It’s more than just facing customers that are furious that their information has been stolen; although that is a significant factor. Expect lawsuits from cardholders as well as fines and fees from credit card companies and their member banks if not PCI compliant.
Most processors add a monthly fee ranging between $20 to $30 for non-compliance. Larger businesses could face substantial fines and loss of income.
The bottom line is that non-compliance and a data breach often spell the end for that business.
HOW MUCH SHOULD I PAY FOR MERCHANT SERVICES?
Business owners know fees affect their bottom line. That is why they must pay careful attention to fees when choosing merchant services.
Fees for services depend on several factors, including risk level. If your small business is high risk, expect to pay more for these services.
As a small business, you may face an additional fee if your transactions for credit cards do not meet a specific monthly minimum.
On average, small business owners should expect to pay between 1 and 3% for credit and debit card transaction processing.
There are also additional fees, and their costs can vary.
WHAT ARE TYPICAL FEES?
The fees for small business merchant services providers include:
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- Authorization fees – Fees charged for every swiping of a card, whether authorized or declined.
- Setup fees – Initial fees for the hardware and software necessary for the account. Sometimes known as an application fee.
- Interchange fees – Fees paid between banks for accepting credit card transactions. Credit card companies set these fees.
- Assessment fees -Fees charged by cardmember associations for fraud prevention and other purposes. Merchant service providers may pass these fees to customers.
- Minimum monthly fee -The amount charged by some processors if a business fails to meet its required minimum monthly revenue amount.
- Monthly fees – Processors may or may not charge monthly fees.
- Transaction fees – Actual fees depend on the card type, but range between 1.5% to 3.5% per transaction.
WHAT FACTORS DETERMINE FEES?
How much you pay in fees varies by the service provider and the type of small business you own. Sales volume, typical transaction size, and the particular needs of your business all play a role.
For example, card-not-present transactions, which are true of all online payments, cost more than in-person transactions.
High risk businesses should expect to pay higher fees than low risk businesses.
At Easy Pay Direct, we offer our Easy Guarantee. If you don’t love the system for any reason, within 30 days of setting up your account, we’ll refund your setup fee AND your first month’s payment of $29.95.
HOW MUCH ARE MONTHLY PAYMENT PROCESSOR FEES?
On average, a merchant service provider charges between 1.3% and 3.5% for payment processing per transaction. Costs for monthly payment processing fees vary considerably for each provider.
However, not all payment processors charge monthly fees.
While traditional providers do charge monthly fees, companies such as PayPal and Stripe do not. These services are not necessarily cheaper, and they charge higher transaction fees to make up for the lack of a monthly fee.
However, PayPal and Stripe do not accept high risk accounts, so that rules out any small businesses in this category.
Such payment aggregators often have lower processing limits than other payment processing options. Any hint of a fraudulent transaction results in immediate account freezing.
TYPES OF TRANSACTION FEES
Transaction fees are expenses the business pays each time it processes a payment. Fees vary between 0.5 and 5% of the transaction amount, and there are different plans available.
- Flat rate – a fixed fee, often called a monthly membership fee. It may also involve a flat fee in addition to a percentage of the transaction amount.
- Interchange plus – costs will vary depending on the credit cards customers use, but this model is the most transparent. Rates vary depending upon the card network and whether transactions are card not present or in person. Rewards cards cost more than standard credit cards.
- Tiered – Transaction fees depend upon whether the purchase is qualified, mid-qualified, or non-qualified. Qualified pricing involves non-rewards cards, while mid-qualified are certain rewards programs. Non-qualified applies to generous rewards programs and corporate cards.
What about the brick-and-mortar cash discount and surcharge programs touted by certain credit card processing companies claiming to eliminate processing fees? The two programs are similar but have their differences.
Cash discounts take place when a business posts a credit card price for an item or service and offers a discount for cash-paying customers at the point of sale.
Surcharge programs involve the opposite. The cash price is posted, but customers pay more if they use a credit card. Surcharges are sometimes referred to as service fees and are not permitted for debit card payments.
DO YOU NEED AN LLC FOR A MERCHANT ACCOUNT?
While you can use an LLC to set up your account, this is not required.
Every MSP has its own requirements, but you may only need a business certificate and an Employer Identification Number (EIN).
CAN A SOLE PROPRIETOR OPEN AN ACCOUNT UNDER THEIR SOCIAL SECURITY NUMBER?
If you operate as a sole proprietor, you can open a merchant account under your social security number, although this is not usually recommended. With a sole proprietorship, there is no distinction between your personal assets and those of your business.
That makes your personal assets vulnerable if your small business is sued. In a worst-case scenario, you could lose your home.
Speak with an attorney about the best structure for your particular small business.
WHAT TO LOOK FOR IN MERCHANT SERVICES PROVIDERS
Look for a merchant service provider that is familiar with your industry and with businesses the size of yours. You also want one with a track record, so you are confident they can provide the reliability you require in payment processing.
You’ll need the appropriate hardware and software for your business. Any business with a physical retail location needs hardware, whether that consists of virtual or wired terminals. Service providers who go to a customer’s location will need a wireless terminal or mobile card reader to accept payments.
Avoid merchant services providers that charge early termination fees, and always look for transparent pricing. Ask about any hidden fees that were not disclosed previously.
As with any business, find a merchant services provider with a good customer support system. Communication is always key. Seek out a provider offering 24/7 support.
Make sure you understand your contract. Look for simple contracts spelling out all specifics.
HOW EASY PAY DIRECT CAN HELP
For more than a decade, Easy Pay Direct has been the leader in providing merchant services for high-risk small businesses.
We offer our own proprietary payment gateway with patent-pending transaction routing technology. We partner with many national and international payment processing companies and banks.
In addition, we offer POS systems, mobile payments, wireless terminals, and more. Our services allow you to use email invoicing, recurring billing, batch uploading, and online payment forms to collect payments.
We offer state-of-the-art PCI compliance, so small businesses do not need to worry about their online security.
We currently serve over 60,000 businesses.
At Easy Pay Direct, our pricing is transparent. There are no hidden fees.
We offer first-rate support services for your small business. Accept payments and enjoy seamless credit card processing.
Find out how your business can benefit from our merchant services.
Get started now by setting up your account or calling us at 800.805.4949.
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