A discussion about the process, steps and options of starting a new business

If you want to be in business, accepting credit cards is a neccesary evil.  Hardly anyone pays with cash anymore, and I know very few people who even carry around their checkbook.

There are literally hundreds, if not thousands, of third-party credit card processing companies in existence.  What a maze going through and trying to compare them!

They all set their fee structure up differently.  Some don't list their fees on their website, and I found that even those who do, don't list all of the fees.  One company didn't even list a phone number, they said it "would be provided upon sign-up".  How many people are going to sign up with a company who is that secretive?

When going over their websites, read the fine print, and remember that some things aren't even in the fine print.  Arm yourself with a list of questions, and don't let the sales rep talk circles instead of giving you answers.

Here is a list of common fees that companies may or may not charge.  You should definitely ask about all of these.

• Setup/Application fee:  Some companies charge one or the other, some charge both, and they are non-refundable.  There are companies who don't charge either fee.  Look for one of these.
• Termination fee:  Some companies lock you into a contract, most commonly 3 years.  If you want to cancel sooner, even if you go out of business, you may have to pay a hefty cancellation fee.  I have had reps tell me they will waive the termination fee, but when I ask them if they will put that in the contract, they say they can't because it's a 'private agreement'.
• Statement fee: I only found one company that didn't charge a statement fee, and that company more than made up for it in their other fees.  This fee ranges from $7 to $15 per month, but be careful of one thing the sales rep doesn't tell you.  If you will be doing two different kinds of processing, such as retail and internet, you pay TWO statement fees.
• Gateway fee:  If you are processing over the internet using a shopping cart and a gateway provider such as NexCommerce, LinkPoint, Authorize.net, etc., you will pay a monthly fee to use the gateway.  It usually ranges from $10-$20 per month.  Some gateway providers add a per transaction charge on top of this.
• Monthly fee:  This can range from $0 to $20.  It is seperate and in addition to the statement fee.
• Monthly minimum:  If the fees that you pay don't reach a specified amount, some companies will charge you the difference up to their stated minimum.  This gets tricky, because each company is different as to which fees they will include toward the minimum.  Some will let you apply your monthly fee and transaction fees toward the minimum, some will only apply transaction fees.  ASK exactly which charges will apply toward the minimum. 
• Customer Service fee:  Yes, unbelievably, I found that some companies charge customer service fees, either flat-rate per month, or a fee per call.
• Discount fees/transaction fees:  The discount fee is the percentage of the charge amount that you pay the processing company.  These vary widely between companies, and even within the same company.  It depends on whether your transactions will be swiped or non-swiped, the nature of your business (some are considered more high-risk), the monthly charge volume you expect, and your average sale amount, among other things.  Every company charges a transaction fee on top of the discount fee, which usually ranges from 19 to 30 cents per transaction.  The important question to ask here is if the transaction fee includes AVS (address verification service).  If it isn't included, this can add another 5-10 cents per transaction.  Several companies also charge a phone authorization fee, should you have to call in for charge approval.  Avoid these like the plague, they add another 50 cents to your transaction fees.
• Equipment:  Many companies offer "free" terminals, but they come with a catch.  Ask as many questions as possible to find out what that catch is.  It's usually a long-term contract with a hefty termination fee.  Terminals are expensive, so many companies will offer to lease you a terminal.  Don't do it!  It's rare that you ever come out ahead on a lease as opposed to buying your own terminal.  If you do buy one, shop around for prices.  I have seen the same terminal sold for $800 in one place and $300 in another. 

When I was comparison shopping, I began a spreadsheet to help me keep everything straight.  It only has nine providers on it right now, however, feel free to email me at Cathi@bizcradle.com if you would like to have it as a starter template.  You can then add more companies as you do your own research.

So who did I choose?  After all this research, I found out Tuesday that Festival Marketplace just recently had a policy change, and they now require all their vendors to use the same provider, so as it turned out, I don't have a choice.  The company they use would not have been one of my picks, but they are waiving some of their fees for Festival tenants due to the arrangement, so it may work out allright for me in the end.