Processing

A large part of owning a business is the ability to accept all forms of credit cards.  In today’s economy, customers want to know that they can pay with credit cards in order to earn mileage points, build credit, and simply because some don’t like to carry around cash.  Merchant’s must be able to process credit cards especially if they are a restaurant or cafe, and there exist are a variety of companies out there that can provide them with merchant processing solutions.  A few things to keep in mind when choosing your processor:

  1. How quickly will the funds post to your bank account after the batch?
  2. How long is the contract for?  Most companies have at least 1 year contracts, and most extend for lengthier periods of time.  A cancellation fee is also associated with terminating the contract early.  This is worthwhile to know.
  3. How much are you paying per transaction and also what percentage of the purchase are you paying?

There exists two types of ways of pricing, a 3 tier program, and interchange rates.

Visa/MasterCard issue over 200 different types of credit cards that offer various bonuses and points to their users.  Ultimately, it is the merchant that is paying for the customer’s bonus points through every transaction that is swiped.

Interchange Pricing:

Visa/MasterCard sets a certain rate for each card that is the minimum that must be charged when processing that particular card.  The merchant will be charged additional basis points (1 basis point is 1/100 of a percent) on top of the percentage dictated by Visa/MasterCard.  In addition, the merchant will be charged cents per transaction.

3 Tier Program:

Instead of each card being entered in for the rate issued by Visa/MasterCard, all credit cards are lumped into three different qualifications: Qualified, Mid-Qualified, Non-Qualified cards.  Qualified are processed at the cheapest rates, while Non-Qualified are the most expensive.  In addition merchants will pay cents per transaction.  MERCHANTS BE WARY: Often the Qualified rate will be cheap, but the mid and non-qualified rates will be significantly higher.  Know your customers, and what type of credit cards are usually processed.

Typically, an interchange program is cheaper for the merchant.