New year, new merchant account?

New year, new merchant account?

Merchant accounts are an integral part of your business. During the new year, while you are looking over ways to improve your business, don't forget to take a look at your merchant accounts and see if you are utilizing the right products.

Whether your business has increased over the past year or slowed down, reevaluating this part of your business will ensure that you aren't paying too much money in order to make money.

Here is a basic rundown of the fee structure so that you can understand exactly what you are paying for.

• Interchange fees: An interchange fee is a fee that is paid per transaction. Typically, this portion of your fees is made up of a percentage of your sale plus a per-transaction pre-stipulated amount. These fees are split between the credit card company and the issuing bank.
• Merchant service provider fee: In addition to the above fee, your merchant service provider might also take a cut of your sales and charge you a per-unit fee.
• Discount fee: Most merchant accounts will advertise a "discount fee" when selling their services. A business has no idea how much of these fees is being siphoned to the issuing bank, the credit card company and the merchant service provider. This results in confusion.

What affects your fees
Your fees can be affected by any number of things. If you have a large volume or dollar amount of transactions per month, your fees will be lower per transaction than someone who accepts only the occasional credit card. This means that those merchants who have a significant portion of their sales come from credit cards have more bargaining power in negotiating more favorable rates and terms. That being said, a small business should still seek quotes with several merchant account providers before choosing a provider.

What to look for
There are a few things that every business should look for when selecting a merchant account:

• An easy-to-understand fee structure. If you don't understand what you are being charged, you will never be able to figure out if you are being over- or undercharged.
• A fee structure that works well with your business model. A low monthly fee with a discount rate or per-transaction fee will work best for those who have low traffic or only accept credit cards occasionally. On the other hand, a high monthly fee with a low discount rate may work better for a company that thrives mainly on credit card sales.

Selecting the right merchant account can be scary, and reevaluating one can seem like a daunting task. However, the effort will be well worth it, as you could save hundreds or thousands of dollars.

Published: January 7,2023