Nowadays you can't start a business without getting bombarded by credit card processing deals:
- FREE Equipment
- LOWEST discount rates
- NO contract
. . .all the things a budding entrepreneur wants to hear. Where once almost exclusively a bank's territory, the internet and the processing industry have changed so much that the playing field is now entirely different. These days 3rd-party processors can offer better service and better pricing. What changed?
Basically, savvy business owners started asking questions, and those fed up with the monopoly banks have on their cash flow sought to diversify their vendors to gain more bargaining power with their banks. The ironic thing is, some banks, particularly community banks, even use these 3rd party processors themselves!
Now business owners have a multitude of credit card processing vendors to choose from, including their banks. These processors are offering more flexibility, more competitive pricing, and programs that better serve their clients' businesses. If you can wade through the deluge of information, $1,000's of dollars in savings await your business every year. Find someone who you can trust, and who listens to your specific needs. Every business is a little different, despite what underwriting departments want to think!
Of course, not all business owners are as savvy as those before them. When these business owners stopped looking at their contracts, they found themselves in multiple year-long contracts charging them exorbitant cancellation fees that RENEWED at the end of the contract, rather than ended. They found themselves attached to equipment leases charging them 4x, 8x or almost 10x the cost of the equipment over the (again) multiple year-long terms that left the business owner stuck with no recourse. Believe me, I get why some business owners hate processors. If I fell victim to that business model, I'd hate me to.
Although many businesses have already been burned by "free" or "leased equipment" programs enough to understand that processing equipment is NOT free NOR $1000's of dollars in cost, they still fall in short in finding a processor that has a relationship to their business. It's your cash flow, don't you think you should entrust it to someone you know?
Fortunately, there are some merchant processors out there with your best interests at heart. Typically, those are the processors that do well when you do well. You should have a mutually beneficial relationship! These processors will work with you to find cost-saving programs out there that will support your business growth.
Thanks to Visa and Mastercard, new programs exist for merchants doing very small transactions (i.e. coffee shops, convenience marts, etc.) that save them boatloads of money on their transaction fees (called "Small Ticket Programs"). You might consider if your recurring business transactions could come directly out of your clients' bank accounts, then ACH debits would save you money on the discount rate. What other creative solutions is your processor offering you?
Matt Koren is the President of Priority Payments Northwest, a Merchant Services Provider located in Portland, OR. He runs his company in addition to his management consulting practice as an Associate with Causeit, Inc. You can contact him by filling out the Contact Us page, or by calling 866-402-1485.