There are several options available in the market for choosing a credit and debit card processor. While having choices is helpful for comparison shopping, it also can get quite overwhelming. ‘To select a processor, you really want to focus on the factors that are most pertinent to your company’.
The fees that processors charge can certainly add up over time. Let’s suppose a business processes over £1 million per year through a credit card processor. The Card processor charges 2%. If the business is able to negotiate a base rate with a provider at 1.75% or less, it will save £2,500.
It is important that you and your Chip & PIN consultant understand the pricing differences for each of these three variables:
- Pound value
- Credit/debit card types.
The setup fees and monthly fees will vary depending on these variables.
It’s also important to note that stand-alone credit card processors such as First Data typically offer lower rates than the merchant services department at a major bank such as Nat West or HSBC. It may seem that it would be more convenient for your bank to be the processor, but bank fees are usually at least one hundred basis points higher.
The fees that processors offer usually depend on the volume of transactions and the total amount of revenue generated. You should be selecting a provider based on your business size and the projected growth in the future. You should be choosing from a much different selection of processors if you’re generating £50,000 a year with 5,000 transactions than a business with £2 million in annual sales with 100,000 orders.
You also need to ask yourself if you’re going to be offering processing through an online shopping cart (e-Commerce), face to face, Mail order Telephone order (MOTO) or a combination of these methods. The rates can vary significantly by method.
Another factor to consider is cash flow. What do I mean by that? Credit card processors can hold the money from the time it is processed to the time it reaches your bank account. Each processor follows a different system, and some even manage the time in order to gain the interest income on the “float.” The time your money is held by the merchant bank can vary from 1 day to 45 days.
In contrast, a payment “wallet” provider such as PayPal offers immediate access to the funds. However, such companies’ fees are sometimes not as competitive as those of independent providers.
Summary: You’re going to need to do your own homework for selecting a credit card processor or choose a broker who can select the right one for you. There’s no one-size-fits-all answer to this question.
About Cornel Sampson
Helping UK Businesses MAKE MONEY and SAVE MONEY on rates they pay to the bank for taking payments by Debit/Credit Cards
Helping Retailers and service providers to take payments by debit/credit cards face to face or online – Saving up-to 40% in Fees & Charges
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