Consumers take merchant services for granted every day. They go into their favorite pizzeria or retail shop and swipe their debit or credit card when it’s time to go. It’s easy to live in this ignorance when they’ve never worked directly with credit card systems before.
Even those who work in the retail and foodservice industries don’t always understand just how important electronic payments are to keeping businesses afloat. The reality is that despite merchant services essentially making the world go around, not many people understand what it is and what it does.
This lack of information leads to misunderstandings. When someone does know a thing or two about merchant services, what they do know is usually wrong or a half-truth. It’s easy to read one or two inaccurate posts about credit card processing, but harder find accurate information that’s actually helpful.
Misconceptions exist, but it’s our job to correct these untruths for you. The following are five pieces of inaccurate information about merchant services, and we’d like to set the record straight.
Card processing is a bank’s job
It’s especially critical for small business owners to understand that this is a myth — if a bank tells you this, they could be outright lying. Can banks handle credit card processing? Sure. Should they, in your case? Each business owner must choose for themselves, but they have many options besides just banks
Banks are notorious for charging clients exorbitant fees and rates for credit card processing services. These fees and rate hikes can mean you have to raise your business’s prices in order to cover them and break even. Who doesn’t want to get the best service for as little money as possible?
Of course, merchant services will cost you — but it shouldn’t cost you a lot. That’s where third-party companies that can help you establish credit card processing come in. The reason businesses commonly use banks for processing credit and debit transactions is that they mistakenly assume that banks are the primary providers of merchant services when they first establish a business and open their business bank account.
Companies with low processing rates are better
This should be true, and sometimes it is! However, processing fees and rates vary from company to company. You should never look at just one rate and then make a decision. There are different factors including service & support, hardware and software compatibility, the time it takes to get your funds, the company’s reputation, other offerings from the provider and rates and fees to take into consideration before settling on a merchant services provider.
For example, some merchant service providers have flat rates for processing services. They’ll never go up or down, no matter how many credit and debit card transactions go through your business. Other companies offer discounted rates, and these may work better for businesses with a lot of processing traffic. The more transactions, the lower the rate becomes. The total cost of all rates, fees and charges divided against your sales volume is really the primary way to measure cost, but the overall value proposition matters more.
The bottom line is that you should always look at the whole picture — not just one merchant services provider statistic.
Credit and debit card fees are the same
Not necessarily. In most cases, these fees are quite different. When comparing the two, companies often charge businesses more for credit card processing as compared to debit card transactions whether or not you use your PIN number. Based on a variety of factors including risk, the cost processors pay for debit cards is generally lower than credit cards so in turn the rates they charge businesses are also usually lower for debit cards.
While most merchants prefer that customers use debit, banks that utilize processing fees often create limitations for debit card use at stores and eateries. Some banks will charge a fee for using your debit card at businesses while offering incentives for using your debit card as a de-facto credit card. This means that banks that process credit payments in turn get a higher cut of business revenue, in theory.
All merchant services companies will offer me the same basic services
This may be true when it comes to transaction processing, but not true when it comes to the bigger picture. For instance, some merchant service providers will gladly help you with the terminal setup process. This may seem like something every service provider should include, right? The truth is that some don’t.
Other merchant service providers limit businesses on options like cash advance / business loan capabilities, gift card and loyalty programs, web & e-commerce solutions and other business-focused features. If services like this make sense for your business, try and locate a merchant services provider that offers them. Again, not all will.
I can’t switch providers — I’m under contract!
While it’s impossible to say that this isn’t always the case, a lot of merchant services providers will negotiate with one another when a business is in a contract and looking to switch. In some cases, the merchant services provider you’re looking to switch to will offer to buy out your contract with the other company. The company you are switching to may even offer a month to month agreement
This means it’s important to constantly be on the lookout for a better processing deal. If you initially made a bad decision and choose a merchant services provider that doesn’t offer what you need for your business, look for another one. You always have the option to try, so don’t be shy.
These are just a few common misconceptions about merchant services and what we can provide business owners. Drop us a line if you have any other merchant services myths you’d like to see debunked or just have questions
1-800-531-8575 or sales@valuedmerchants.com
