Review credit card processing options

What do a Philadelphia cabinetmaker and the Better Business Bureau (BBB) have in common? Advice to do your homework when it comes to finding the best and most affordable credit card processing.

In a series of recent New York Times posts, cabinetmaker Paul Downs identifies perils, plusses and pitfalls of shopping for the best deals. His advice includes the following do's and don'ts:

- Downs suggests becoming an avid shopper-unless you don't have the time or patience. He notes, "...looking around isn't easy. Comparison shopping, by which I mean following the sales process to the point where the final pricing and terms are revealed, is almost impossible." He recommends first identifying typical transaction size and projected monthly charges. Depending on where you're at, you may find providers "willing to waive term requirements and cancellation fees."

- Read the agreement thoroughly. Downs laments that when he read through an agreement to use Square credit card services, he found unpalatable transaction size and frequency limits not identified prominently on their website.

- Find a credit card services advocate who will help protect your interests. Downs notes, "The sales representative from merchant services is your best advocate when dealing with the underwriters...All three of the representatives that I worked with tried hard to come up with a way to make the relationship work."

- Don't lease a terminal. Buy instead for a better deal, says Downs.

- Always put in a personal ID number with debit card transactions. Otherwise, Downs asserts, you will be charged "very high interchange fees, instead of the low costs mandated by the Durbin Amendment."

- Study reviews of merchant service providers. Downs suggests Merchant Maverick, pointing out, "I read a few reviews. I liked the format. I have no idea whether it is doing a good job, but at least it offers a point of view."

- Stay abreast of periodic fee reports. According to a North American Bancard blogpost, "Every year in April and October, interchange fees are published by Visa and MasterCard. Interchange fees are what credit card processors pay to the issuing banks of cardholders. Basically, the lowest cost provider is actually the one who charges the lowest markup."

- Gauge whether likely savings merit the search for cheaper services. Notes Downs, "Here's the sad math: even if I cut my card processing costs in half, my savings would be 2 percent of $400,000. The $8,000 savings is not insignificant, but there are many issues I could have spent time on that might have yielded similar or greater savings...it takes a huge amount of time to figure out what is going on.."

Moving forward with smartphones

The BBB addresses increasing frequency and opportunity of smartphone transactions. A BBB article published earlier this year points out, "Gone are the days of having to rely on your 'brick and mortar' store to drive shoppers to your business. These days, traveling retailers can make a sale with just the touch of a button and the swipe of a credit card via their smartphone."

The BBB strongly advises research due diligence for mobile credit card services: "Just like a landline-based credit card system, you'll need a merchant account to process payments, a scanner device to read the card, and software (app) to make it run. Don't skimp on research. Start with your bank or your credit card service for suggestions on recommended services and devices. Check out all vendors at www.bbb.org. Ask for references."

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