Avoid Costly Merchant Card Service Traps

Take your time and do whatever you must to fully understand the terms of each provider. Beware of hidden costs that lurk in the small print. Compare and contrast competing bids. Take special heed of the following:

• Price and Terms: Price is meaningless until you know the terms. Be skeptical of a salesman’s claim that he can save you money. Get the facts. If you can’t get clear and understandable answers to your questions you have cause for doubt.
• Agreement Length: Service agreements will require a minimum contract length. Keep in mind that things always change and prices tend to decline over time. Resist the temptation to commit to a long-term contract for what you believe are favorable terms.
• Early Termination Penalty: Find out what the penalties are for early termination. Don’t agree to anything that sounds unreasonable.
• Who You Pay: Never make payments to an individual. The check should be written to a business name, not a personal name. If your merchant services representative requests that you do so, terminate the relationship.
• Get a Copy Upon Signing: Unscrupulous companies that bury onerous terms in the small print will characteristically avoid providing you with a copy of the agreement in an attempt to make sure you don’t “get wise.” Don’t do business with an organization that offers to “mail your copy to you in the next few days.” Get a copy of what you sign, right when you sign it.
• Insurance: Don’t purchase insurance that replaces your terminal if it fails. It is rare that such equipment fails and you can likely get your processor to donate the equipment if you use their service. If you buy or lease equipment, make sure it comes with a warranty. Most merchants believe they are under warranty as long as they are leasing. This is not the case. Most equipment manufacturers guarantee the equipment for a maximum of one year.
• Equipment Leases: Credit card terminals are universal today and can be purchased new for between $300 and $600. Keep this in mind when you are offered a lease. A four-year terminal lease at $45 per month will cost you $2,450 over the term – not a good deal.

Merchant processing fees can add up. As long as you own a business you will be paying these bills, so it makes sense to invest the time necessary to educate yourself on how credit card acceptance works, who are the players and from where the costs come. Review your monthly bills for accuracy, get competitive bids every few years, and make sure that you are perpetually getting the most for your money. This may be the only way to make a profit today – continually ratcheting down overhead expenses.