5 big mistakes to make when choosing a merchant account

5 big mistakes to make when choosing a merchant account

Searching for the perfect merchant account might be exciting -- it means your business is moving up in the world. Using credit card processing online makes it easier for your customers to get the products and services they need, which means more money for you. However, it is a bad idea to let your eagerness take control.

Here are some merchant account mistakes that are common with business owners.

1. Believing in free: You might be amazed to discover that many credit card processing companies advertise a free merchant account option. You think, "Wow, that's a great idea!" But put the brakes on for a second and read the fine print. Free, in this case, doesn't actually mean free. A free merchant account is one that does not charge a monthly or annual fee for services. Instead, they simply charge by the transaction, which at first, sounds wonderful. However, they have to make their money somewhere, and they'll often accomplish this on the back end of credit card processing. In other words, you'll probably pay more for each transaction.

2. Failing to read the contract: Before you sign up with a merchant account, find out exactly what the company charges for when it comes to credit card processing. Will you be charged a set-up fee? Extra pennies when the transaction amount exceeds a certain threshold? Processing fees? All of these are important to know. Beware: A merchant account will not necessarily advertise these charges when you first investigate their services. Make sure to ask for a copy of their contract, terms and conditions or service agreement. Comb through it to find out exactly where your cash will be going.

3. Not asking about withdrawals: A merchant account service might try to make a few extra bucks by holding on to your cash for a few days (up to two weeks) before releasing it to you. Obviously, this would be a major disappointment if you count on that cash to be available when you need it. Before you sign up for credit card processing, learn exactly how and when you can access your funds. Fortunately, a reputable merchant account will not impose restrictions on fund access unless there is a chargeback or some other extenuating circumstance. If you find this type of language hidden in the contract, find another credit card processing firm.

4. Failing to report. When you sign up for a merchant account, you will need to supply the credit card processing company with certain information such as the type of business you run, your sales volume and other proprietary data. If you supply incorrect information or change how you use the merchant account, you could be in trouble.

5. Not considering fraud protection. When you sign up for a merchant account, ask if fraud protection services are included with credit card processing. If not, you and your customers could be at risk for scams. It is always best to go with a safe and secure firm that cares about protecting its clients.

Having a merchant account is a great way to improve the efficiency of your business, but make sure you read the fine print and get numerous quotes before making a decision.

Published: December 31,2023