Since its inception in 1950, the credit card processing industry is a vastly improved industry. Businesses could not process transactions over the phone back then and fees were significantly higher than they are now. The National Association of Credit Card Operators was the only credit card processing firm available in those days.
In the 1970s, many banks started offering their own credit card processing services. This led to the creation of Visa and MasterCard in 1974. These two companies became leaders in credit card processing. Nearly every American business used one of these companies to process its transactions by 1978. Credit card processing is an integral part of modern economic life. This allows customers to buy items without the need to carry cash or write checks. Businesses can also accept online and offline payments using credit card processing.
Many companies offer credit card processing services. Each company has their own fees and terms. It can be hard to choose the right company for your small business.
Here are some questions to ask when you choose a credit card processing business.
What kind of business will you be doing?
It is crucial to decide what type of business entity your small company will be. If it is a corporation, then there are specific tax laws that will govern how it must file taxes. You should also check which state your company is registered in, as different states have different tax rates. Taxes will be different for an individual or contractor than for a corporation. Many entrepreneurs make it seem like they own businesses to get the lower taxes. If not done properly, this can lead to legal problems.
How much do my annual sales volumes look like?
How many credit card transactions your company processes each year will affect which credit card processing company to use? Businesses that process less than $3,000 per month usually only have to pay the fees associated for using a retail merchant account (ISO) or an independent sales organization (ISO). A bank may negotiate a lower rate for merchants that process between $3,000 and $7,500 each month. Companies that process more than $7,500 will receive lower rates, but it is important to evaluate all options before deciding on one. To avoid payment gateway problems, it is important that businesses that process more than $3,000 per month have a merchant account.
What is the average ticket size for me?
The average ticket size refers to the average amount of every purchase made with a credit card. This is an important number to consider when choosing a credit card processing company. A retail merchant account, or ISO, is recommended for businesses with a minimum ticket size of $15. These accounts offer lower rates. A payment gateway is recommended for businesses with a ticket size greater than $15. They offer lower rates and have more features than ISOs or retail merchant accounts.
What are my monthly estimated fees?
These are the factors to consider when calculating your monthly estimated fees
- Monthly fee for merchant account
- The per transaction fee
- The gateway fees
- If applicable, the annual fee
- If applicable, PCI compliance fees
When calculating your monthly fees, you will need to consider all of these fees. Some companies will offer lower rates to businesses with a larger average ticket.
How many transactions can I expect?
You should also consider how many transactions you process per month. A retail merchant account (or ISO) is best for businesses that process less 250 transactions per month. They typically offer lower rates. A payment gateway is recommended for businesses that process more than 250 transactions per month. They offer lower rates and have more features than ISOs or retail merchant accounts.
What types of credit cards can I accept?
The type of credit cards that you accept will determine the type of company you use. A payment gateway is best for businesses that accept Visa and MasterCard. They typically offer the lowest rates. If your company accepts American Express or other credit cards, however, you need to find a company that can process all major credit cards.
How long is the turnaround time for deposits?
The turnaround time for deposits refers to the time it takes for your credit cards processing company deposit your sales proceeds into your checking account. The turnaround time for deposits will depend on the speed at which your credit card processing company processes transactions and how quickly they transfer funds electronically to your business checking account.
What is my daily average balance?
The average daily cash balance is simply the total amount of cash in your merchant account at any one time. This number can help you decide which credit card processing company to use. Some companies charge more if your account has less money at any one time. Some companies offer lower rates to accounts that have more than $1,000,000 in them. However, these same companies might charge higher rates for accounts with a daily average balance below $10,000.
It can be difficult to understand all the options available and can take time. However, Balanced Processing Partners can help you make it easier and recommend the best solution for your company. All of the above questions can be answered by us.