Figuring out the best credit card service provider for your company is no small feat. There are many service options, fees and jargon making it difficult to understand what the most important factors are. This article addresses the topic in order focus on the most important factors.

Cost

Generally the most significant factor in selecting a credit card service provider is cost. The most important fees fit into two board categories Monthly Fees and Transactional Fees. The main Monthly Fees are the monthly minimum fee (in the $15 to $30 range), the monthly statement fee (in the $10 range) and in addition if you are accepting credit cards online you will have to pay a monthly gateway fee (around $10-20).

Important transactional fees to consider are the discount rate fee (in the 2% range) and the account provider transaction fee (about 20-30 each transaction) and the address verification fee (5 cents each time).

Account Setup

Ease and speed of account setup are also critical in small business. Ask about the Average Approval Rating, this determines what percentage of merchants get approved and is a good indicator of how easy the setup process and support is (95% or greater is preferable).

Also, pay attention for account setup time. Most good merchant account providers can setup an account in 2 days. Make sure to determine how long it will take for the money to transfer into your account after a purchase is made. The better services can do this in 2 days.

Customer Service and Features

Determine whether customer service is 24/7. Also find out what service channels exist i.e. email, phone, and instant message.

If you are physically swiping credit cards you will want to make sure that the merchant account provider has access to a good selection of Point of Service (POS) machines.

Focusing on cost, ease of setup and customer service will help you examine the critical credit card processing criteria and make the best decision with regards to your small business needs.

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The credit card transaction process in not intuitive, it is therefore helpful for small businesses to understanding what parties are involved in a credit card transaction and how it works.

The Involved Parties

The acquiring bank (otherwise known as the merchant account provider) is an institution that is required for a merchant to be able to accept credit card payments.

The customer’s credit card is provided by a card issuing bank.

The Credit Card Transaction Process

Here are the steps related to a credit card transaction between a merchant and a customer.

Credit Card Information Input

Credit card information can be input in two ways. It can be swiped or keyed in. When someone is physically present during the purchase (at a movie theater, or supermarket) their credit card is usually swiped using a magnetic card reading point of service (POS) machine.

When the customer is not physically present and the credit card transaction is done using the internet or over the phone or by mail order, then the information needs to be keyed in. This method requires the credit card number and additional information to protect the merchant and the customer from fraud.

Authorizing the Transaction

After the card information is input, it travels to the merchant account provider, who interfaces with the costumer’s credit card issuing bank and determines if the customer has sufficient funds for the purchase. If the customer does, the customer issuing bank puts a hold in the amount of the purchase and sends an authorization back to the merchant and the merchant account.

Batch Processing

During the course of the day the various merchant transactions are stored by the merchant account provider. By the close of the day these transactions are batch processed, which results in money being transferred from the card issuing bank to the merchant account bank. Before this done the card issuing bank subtracts a fee and then merchant account bank also takes a fee.

For example if a customer buys a $100 product and the interchange fee is 2% and the processing fee is $0.50 then a $100 purchase loses $2 at the customers card issuing bank and $0.50 at the merchant account provider, meaning the merchant actually gets paid $97.50 on the transaction.

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