One of the biggest technological advances in the past 20 years was the ability for a business owner to accept a credit card or a piece of plastic as a payment method. Business owners can sell products over the web and in their retail store without ever seeing actual cash. BRILLIANT!!!
In order for this to happen however, there needs to be a middle man that processes the payment to make sure everything goes smoothly. You also do not want anyone to hack into this process and steeling your credit card information or your customers credit card information. Credit card processors or as we like to call them, Merchant Gateways, are the party in the middle that make all of this happen. They take the credit card data, process it and make sure the credit card actually has money on it, and then notifies the bank both on your side and the customers side for a successful transaction.
There are multiple companies out there that offer credit card processing services. Each company will even offer your business point of sale credit card processing devices so you can accept credit cards in your retail store. In the end, they all so the same thing and offer the same service. The real difference is in the contracts each company offers and the security each company offers.
Depending on which company you go with which really has to do with their brand in the market, you will be forced to sign a long term contract at a certain rate. When we say rate, we mean the percentage of your sales that you will pay the credit card processing company. The way the credit card processing companies make their money is usually by a small monthly fee like $50 per month, along with charging a small percentage of your monthly credit card sales. For example, if you process $5,000 per month in credit card receivables, the credit card processing company may take 3% of that $5,000 as a fee.
In order to get the lowest possible rate that you would pay the credit card processing company is by growing your business. Some businesses like yours might be able to get a rate at lets say 1%. In order for this to happen you must be processing thousands of dollars each month in credit card receivables. The more cash you process in credit cards the lower your rate is going to be.
When choosing a credit card processing company make sure to ask as many questions as you can. Try to stay away from long term contracts if you can.
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