With all of the information floating around about credit card processing, it's often hard to tell what's true and what's not. Being misinformed about credit card processing can be a costly oversight. Common misconceptions about merchant accounts can lead to costly mistakes.
Mid and non-qualified surcharges are standard
Tiered merchant account pricing has become so widespread that most businesses don't know that there are other less expensive pricing options. Mid and non-qualified surcharges account for the vast majority of processing costs for any business that has a tiered merchant account pricing structure,
but it doesn't have to be that way.
Switching from a tiered to an interchange plus or flat rate merchant account pricing model will eliminate the expensive mid and non-qualified surcharges and downgrades.
All merchant accounts have a contract & cancellation fee
Not all merchant accounts have long term contracts and cancellation fees. In fact, increased competition in the credit card processing industry has given way to a trend away from requiring cancellation fees. Even those merchant service providers that initially require contract terms and cancellation fees will quickly waive them if it means earning a new merchant's business.
Merchant account contracts guarantee rates & fees
There are no benefits to locking yourself into a long term contract and cancelation fee. Contracts do not guarantee rates and fees for the length of the agreement. Visa and MasterCard have the ability to raise interchange reimbursement fees twice a year in April and October. Interchange reimbursement fees are the benchmark by which all credit card processing charges are figured. If interchange fees change, so too will your processing fees - regardless of whether you're in a long term contract with your merchant service provider.
Your local bank has the best rates
Many business people turn to their bank when they need financial services, and it seems only natural that a bank would be able to offer the lowest rates and fees for credit card processing. However, this often is not the case. Smaller banks usually outsource their processing services to a larger institution that specializes in electronic bankcard processing - called an Acquirer. By getting merchant services from a smaller bank that outsources the processing services, you're essentially adding a middleman to the mix and increasing final costs.
However, larger banks that act as their own Acquirer are able to offer competitive rates and fees on processing services. Especially when offered as a package with other banking products such as checking and savings accounts, merchant account rates and fees through larger banks can be very competitive.
Leasing/Renting credit card machines is cheaper than purchasing them
Never rent or lease a credit card processing machine. If you do, you will end up paying ten times what the machine is worth by the end of the rental or leasing period and the machine still may not belong to you.
There was a time when credit card processing equipment was quite expensive and leasing or renting it made financial sense. Those days are long gone, and a terminal that will rent or lease for $30 a month over three years can be purchased new for under $200 with a new merchant account.
Credit card processing equipment will always be less expensive when it's purchased while opening a new merchant account. However, even though equipment is more expensive when purchased without opening a new merchant account. It's still less expensive to buy it than to rent or lease it.
