Yesterday I talked about starting a blog. Blogging is a great way to create a space to talk about your passions and hobbies but there is a genuine chance for it to become a business and of course there are other business models that can be pursued online. This includes promoting a service you provide or selling items via an eCommerce site. At some point you may have to start taking payments and when it comes to taking those payments there are costs and details involved.
Today’s guest post supplied by Shopify looks at what costs should be considered when accepting payments via credit cards.
Costs to Consider When Accepting Credit Cards
Many merchants fail to consider the costs of accepting a credit card as a form of payment. These costs accrue quickly, and may require you to raise the prices of your goods or services. If you are in this position, it is important to educate yourself on some of the costs that are associated with credit cards.
In order to be able to accept credit cards, you must have the proper equipment. Some companies may require you to purchase a specific processor, while others will let you rent one for a monthly fee. Depending on how advanced the equipment is, the cost of equipment could range from a couple hundred dollars to a few thousand dollars.
When you first begin to accept credit cards as a form of payment, there will be start up costs. These costs usually come in the form of application or programming fees. Most of the time these fees are negotiable, and can sometimes be avoided. It is important to ask about the start up fees so that you are not surprised when you receive your bill.
Discount Rate and Acceptance Rate
The discount rate is the percentage of a sale that the processor is allowed to keep. When a customer’s chooses to pay for an item or service with their credit card, the merchant can choose to add on two fees. One fee is the discount rate, which can range from 1-5% of the sale. This is a fee that the merchant can negotiate over time, and may even be able to avoid it altogether. The second fee is the acceptance fee or transaction charge. This fee is a flat fee that is charged to every customer using a credit card. With most credit card equipment, when the customer swipes the credit card, they will be asked to accept or decline the fee. The customer must accept or decline to continue with the purchase. If the customer accepts, the purchase will be complete. If the customer declines, he or she will have to use a different form of payment.
End of Month Fees
Normally, end of month fees will range from .09 to .12 percent of monthly credit card sales. It may seem like a small percentage, but this fee is usually large. This fee is one of the main reasons that merchants will raise prices after implementing a credit card machine into their check out process.
Each of these fees is a way for processors to gain payment for their services. It is important to make sure that you do your research into the different fees before you accept their terms. Ask the processor to be upfront about every fee and find out why that fee is necessary. If you are able to negotiate any of these fees, you should do your best to avoid paying that fee. Avoiding these fees may allow you to reduce the amount that you will have to raise prices on your goods or services.