Can you afford your merchant account?

Can you afford your merchant account?

Small businesses need merchant accounts in order to process credit cards. Having additional payment options brings in more business. While some merchants may feel like they do not do enough business in order to afford a merchant account, the truth is that they can not afford to refuse credit cards as a method of payment for goods and services. Finding the right merchant account for your business may seem overwhelming at first, but understanding the terms of the contract will help you make an informed decision.

Calculating affordability
There are some calculations that need to be done in order to figure out if your business will be able to afford this service. Merchant accounts have a variety of fees set by Visa, Mastercard, American Express, Discover and merchant account providers. Project the number of credit card transactions your business anticipates to have for each month and compare it to various merchant account's monthly minimums and fees.

Monthly minimum fees
According to Entrepreneur, a fee is given to cover costs when a merchant does not satisfy their monthly processing volume. For example, if your monthly minimum is $25 worth of transaction fees and your business only accumulated $15 worth of fees, then you would be charged the additional $10 to make up for the difference.

If monthly processing fees are over the minimum amount then there is no additional charge. Monthly minimums are negotiable and can be reduced if you expect your monthly amount of transactions to be low.

No minimum volume accounts
Most accounts have these minimums to maintain the merchant account and create profits for providers. There are some accounts with a no minimum volume policy. These merchant accounts usually wave the monthly minimum fee and while it seems like you are saving money, you may end up losing out on better customer service. Not having 24-hour tech support may be a feature you are not willing to sacrifice for reduced costs.

Length of Contract
Most banks require a merchant account contract that will last for three to five years. If you are going to commit to a contract, then opt for a longer contract term for lower rates and find out how much the contract termination fee will be.

Merchant Account Fees
Additional fees to consider when comparing merchant accounts include annual membership, charge backs, gateway, interchange fees, customer service, equipment rentals and annual membership fees. Calculate these potential costs and consult an accountant before agreeing to any contracts.

Published: October 19,2023