Equipment And Terminals

If you are processing credit cards in a physical environment then you will require a credit card terminal.   Four big pieces of advice: 1. Avoid terminal leases - they are almost always a bad deal.  When credit cards were in their infancy credit card terminals were very expensive and needed to be leased.  These days, the simple kinds of credit card terminals that most merchants need only cost a few hundred dollars, which is the kind of thing for which most small businesses can just write a ch...

How To Get A Good Deal On Your Merchant Account

Small business owners are incredibly busy people.  They also make the best customers because they
  • Make more money on average than other types of workers
  • Are sympathetic to business interests - i.e. you know what it's like for a customer to give you a hard time so you cut your suppliers a break
  • Are too busy generating new revenue to bargain very hard with their suppliers
Credit card processing services (Merchant Accounts), however, are among the bigg...

Reading an Interchange Plus Merchant Statement

Interchange Plus billing is the most transparent way to get billed because it clearly lays out what VISA and Mastercard are charging you (which isn't negotiable) and what your Merchant Account Provider is charging you (which is negotiable).  It is the only way to compare apples-to-apples a quote from one Merchant Account Provider against another. Here is an example of a Merchant Account statement for an account with Interchange Plus pricing. 1. The breakdown between each of the card types....

Reading A Hybrid Bill

There are lots of different ways that a merchant account statement can be presented.  The best way, which is most transparent to the merchant, is interchange plus and the most common way is 3-Tier .  The bill below is somewhere in-between.  It also allows me the opportunity to demonstrate some of the dirtiest tricks played by merchant account providers. 1. V  is a regular Visa credit card, VB is Visa Business, VD is Visa Debit. 2. This shows the danger of focusing on 1 rate when negotiatin...

Explaining The Fees

Your merchant account provider will charge you a variety of fees.  Since some fees are charged on a % basis, some on a per-transaction basis, some on a per-month basis and some on a per-year basis it can be difficult to compare the price of one merchant account provider to that of another.  One of the main ways that merchants get a bad deal is that they don't notice a "tiny" fee in the small print of their contract that adds up to be big. Explaining the Fees:   More

Reading A 3-Tier Merchant Statement

One of the ways the the processors make their money is by making the fees as difficult to understand as possible. Therefore, it pays to know how to read a processing bill so you can know how much you are being charged and figure out if you are getting a good deal.  Most merchants are pricing according to 3-tier pricing, which this section covers. 1. Depending on how your account is priced, this section will include several categories. 2. This section shows how much you are being charged fo...

Who Makes Money From My Merchant Account

The supply chain that provides merchant account services is complex.  It helps if you know how much money each company in the chain  is making off of you so that you can be a savvier negotiator and get a better deal. Keep in mind that these are rough averages based on data that we dug up from several sources, each situation is a bit different but we believe this view is representative. Interchange is the amount that is passed through VISA and Mastercard to the issuing bank (big credit card...

Merchant Account Supply Chain

When I first signed up for processing I had a difficult time figuring out with whom I was dealing.  Who were the guys calling me up and trying to sell me processing services when I first opened the business?  Who were the people on the other end of the phone when I had questions about my bill?  Who decided what rate I got charged? The electronic transaction industry has grown very quickly.  The industry has grown up in an efficient manner where companies at each stage of the supply chain shar...

How Merchant Accounts Work

This is a brief description of how credit card processing works.  Credit card processing has two parts: Authorization and Settlement:  


Keep in mind this all takes ~2 seconds for an online transaction and about 15 seconds for a dialup transaction:
1. Cardholder presents the card (or the card number, expiration date and security code) to the merchant.
2. The Merchant communicates the card data t...

Merchant Account Costs

One of the main ways that you can negotiate a good deal for yourself is to know what others are being charged.  Unfortunately, most merchant account providers are not very transparent in their pricing, we have done some research to shed some light into the murkiness.  

What is the industry average price?

The analysts at Morgan Stanley who research the stocks of the publicly traded merchant account providers, estimate that the average Visa / Mastercard credit card fee is 2.15% .  F...