As a small business owner, there are several mistakes you must avoid if you are going to find to a payment processor who will suit your needs as your company grows. However, if you are just starting or keen to develop your business, it’s easy to forget to ask the right questions, and by then, you might be committed to a contract that is difficult to get out of. To reduce the risk of this, here are six things every small business should look out for when searching for a payment processor.
#1 Not Developing an Understanding of the Fees or Reading the Terms and Conditions
One of the most misunderstood areas of payment processing is the costs. Every merchant who accepts credit cards will be familiar with interchange or the wholesale fees associated with card payments, but there are other ongoing costs and fees to consider, too. Common charges associated with a merchant account include:
- Set up fees.
- Discount rates.
- Address verification fees.
- Ongoing fees for a payment gateway.
Moreover, if you leave your payment processor before your contract is up, you will often be charged a termination fee.
Before signing up, make sure you are clear on all the fees associated with your account and ask questions before making a long-term commitment. However, fees aren’t the only issue a merchant needs to be wary of.
Another problem area can be the small print. Everyone knows they should read the terms and conditions before entering an agreement. However, research shows that 73 percent of us don’t read the terms when signing up online, and 17 percent of those who do look at the terms don’t understand them.
As a small business owner, you don’t want to sign a contract only to find the payment processor is not suited to your company’s requirements in the longer term: read the small print carefully, and if you’re not clear on any aspect, speak to the payment processor prior to making a commitment.
#2 Paying Too Much for Card Processing
Paying more than you should for credit card processing is a common mistake among large and small businesses. However, as a small business, you cannot afford to pay excessive amounts for credit card processing, and you need to understand the factors that influence how much you pay.
To reduce your risks of overpaying, regularly monitor your statements so you have a good understanding of the fees you are paying every month and analyze them to see if there is a way you can reduce the fees.
In addition, when viewing your statements, check you are not paying for services you don’t need and look for hidden costs.
#3 Not Examining the Different Payment Options
Prior to signing up to a payment processor, develop a clear picture of the payment methods that will be most suited to the way your company does business and look at all of the available options. Do you want to accept mobile payments to meet the growing demand, a hosted pay page for ease of use and installation, or do you plan on taking large volumes of B2B transactions and need access to Level II and Level III processing?
Weigh up all the choices and speak to your credit card processor to ascertain the most suitable payment method for your company’s needs as it is now and moving forward.
#4 Failing to Ask Enough Questions
Don’t commit to a long-term contract until you’ve asked plenty of questions. The following list isn’t exhaustive, but it does give some suggestions of some of the most important questions to ask. They Include:
- What fees are associated with your account?
- Does the payment processor offer interchange plus fees?
- How much will you pay in annual fees?
- When are cash payments settled?
- How long does it take to set up an account?
- As your business develops, your credit card processing needs might change. Ask how your payment processing company can support you.
- Does the payment processor support a wide range of credit cards or is it limited to the two major ones?
- Does the company offer mobile payment solutions?
#5 Avoiding Chargebacks
Once a merchant account has been established, you need to know how to protect your business’s finances and maximize profits; a common problem area for retail businesses is chargebacks. Chargebacks come with four reason codes, so make sure you are familiar with all of them.
In some cases, chargebacks might be a genuine mistake, or so-called friendly fraud, where a customer forgets they have made a purchase and files a chargeback, or they could be due to deliberate fraud.
Keep a record of all credit card payments with records of any phone or Internet orders, so you can prove when and how the order was received should you need to challenge a chargeback, To lower the risks of chargebacks:
- Have a clear return policy.
- Set out clear terms and conditions.
- Offer a high standard of customer service.
- If you are selling online, ensure your descriptions are accurate.
- Don’t use stock photos; this can lead to customers feeling like they have been misled.
#6 Not Getting Enough Support
Funding options can be limited for small businesses, and small business owners often try to go it alone. Therefore, ensure your credit card processor offers ongoing support, so you know you can turn to them should a problem occur.
Before signing up, ask about the support levels the payment processor offers and whether there is a fee for it, and check their website to see how easy it is to contact support should you need to.
In addition, ask a few questions to ascertain how knowledgeable staff is about the products/services and how quick they are to respond to your concerns.
It is imperative that small business owners get the best possible deal with their payment processor, if they are to maximize profits and build a long relationship as their business evolves.
This means asking questions, comparing processors, making sure there is long-term support available, and finding a company that is quick to respond to your concerns, as well as adapt to your business as it grows.