If you choose to lease you will pay more in the
end than if you had purchased the processing
solution on day 1. Lets say you find a merchant
account provider who'll charge you $200 to
purchase a Real-Time Internet credit card
processing solution. Or they'll lease you the
same solution for $20 per month for the next 48
months. This leasing agreement will cost you
$980 in total - $760 more than you'd pay if
you'd purchased the solution and used it over
the same time period. Also, be aware the above
calculations don't include the state sales tax
on the lease, or the amount that's charged for
the damage/loss waiver. With these two
additional costs, you can end up paying as much
as $20 more, along with the lease amount you're
charged for the solution. Another thing you
should note is that the 48 month lease is not
cancelable, so even if you go out of business
you may still have to pay out that lease until
the 4 years (48 months) is completed.
Not all leases are for a 48 month period - some
providers offer 12, 24 and 36 month leases.
However, the shorter the lease period, the
higher the monthly lease cost will be. Your
credit rating will also have an effect on the
amount you pay for a monthly lease. Those with
bad or no credit will almost always pay more
than those with good to excellent credit. Check
with the Merchant Account Provider for details.
Needless to say, purchasing a processing
solution is by far the best way to go - and it’s
100% tax deductible, too.
General
Questions To Ask
In addition to identifying these fees, there are
several things that you should ask a company
before you take the plunge and purchase their
solution:
Can you provide me with the
email addresses or URLs of at least 5
customers who I can contact for references?
Are you willing to put
everything in writing, including all fees?
What is the name and
location of the processing bank?
Are you registered with
Visa and MasterCard?
Do you provide 24/7 support
over the phone? (If so - and they should -
test it out)
Is a reserve account
required? (If the answer is yes, look
elsewhere)
When will my funds be
available? (Aim for 3 days or less)
Are you a member of your
local Chamber of Commerce and/or with the
Better Business Bureau (BBB)? (If they are,
check to see if there are any previous
complaints or disputes on their record)
Are the banks with whom you
partner to issue merchant accounts FDIC-Insured?
Are you a member of the
Electronic Transactions Association (ETA)? The
ETA is a trade organization that supports fair
and ethical business practices for Independent
Service Organizations (ISOs) -– a fancy name
for Merchant Account Providers.
Questions For Internet Real-Time Processing
Do the Secure Payment
Gateway and Merchant Account already work with
the shopping cart or solution you want to use?
Integration can be expensive or, in some
cases, impossible.
Does your Web Hosting
company support the Gateway/Processor you
prefer? They may be able to accommodate you,
but usually this takes time and patience - and
can be impossible.
Does the Gateway/Processor
support electronic checks? If not, you will
have to pay yet another company to do this for
you. Aim to find a provider who offers support
for checks, credit cards and a Gateway all
under one roof.
Does the provider publish
all their fees on their site? The ones that
don’t may withhold this information so that
they can mark up the price they charge you!
Is the company too big for
their (and your) own good? In many cases, a
smaller company is better able to provide
direct support, help eith integration, and
consistent service.
Does the Merchant Processor
or Gateway only provide Internet services?
We've all heard of “dot com failures”, and
Internet Processors are no exception.
CyberCash, perhaps the best know Gateway,
recently filed for Bankruptcy! Make sure that
your Processor/Gateway also has real world
merchants as clients to ensure long term
stability for your business.
Does the Gateway provide a
Virtual Terminal and Online Reporting? Make
sure they do, because you'll need these
facilities.
Make sure you read all the terms and conditions
carefully, and keep your eyes on all the
costs involved - not just the discount and
transaction rates. Again, we recommend that you
consider the purchase of a processing solution
rather than leasing one - you'll be glad you did
in the long run.
Next week,
Part 3
will explore third party processors, fraud,
encryption, and an overview of shopping cart
software. See you then!
