Accepting Credit Cards?

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A few minutes spent here will save lots of time and money!"

Maybe you've already had the experience of jumping at the lowest quoted rate for card processing only to find that the first monthly statement disclosed fees that weren't heralded along with the low-ball quote, and that .99% (.0099) quote turned out to be 4% with all the fees and rationales for higher rates thrown in. There's all kinds of add-on fees: authorization, transaction, statement, gateway, monthly minimum, batch, customer service, chargeback...

The downfalls were 1) trusting someone in the credit-card industry to be honest and transparent and 2) not understanding the excuses Visa has for charging higher than minimum fees.

Visa classifies consignment and resale stores as 'retail' for their purposes, which is neither good nor bad. The minimum rates for brick and mortor stores are lower than online stores because credit cards are 'present'.

Visa then divides their credit-card 'risk' into 3 tiers for pricing: Qualified, Mid-Qualified and Non-Qualified.

Qualified transactions are regular credit cards that are swiped. This is the lowest rate possible and is almost always the rate a card processor quotes when asked, "What is your rate?" The problem is many cards used for purchases are not qualified for the lowest rate because Visa claims they are at higher risk when:

The highest rates apply to non-qualified transactions which are:

The exception is debit cards which are processed at rates well below qualified rates. All Visa rates can be viewed on their website.

Some helpful terms:

A 'basis point' is one 100th of 1%, or .001 so if a 'fee' is quoted as 5 basis points, based upon $100 the fee is $100 x .005 = $0.50 or 50c.

'Effective Rate' is the actual % of credit-card sales paid for fees. Because fees, card volume and types of cards vary from month to month, the effective rate is computed on a monthly basis. If a store processed $10,000 in business and paid $500 in credit-card cost, the effective rate is 5% (and not all that unusual with add-on files piled on).

'Interchange' is the fee paid by the bank acquiring the transaction to the bank that issued the card. Interchange is based upon card type, the amount of the transaction, the perceived risk and the type of business.

A 'merchant account' is an account for the store for accepting payments by debit and credit cards. Transaction fees are deducted from sales proceeds and the difference is transferred to the store's bank account.

Getting a Merchant Account and Credit-Card Processing

Local banks are the strictest. They may require that the business be 2 years old and be local. They may require tax returns and credit reports. Even though they may only take businesses with the least perceived risk, rates don't reflect the reduced risk.

Online offers are the worst. The credit-card industry is right down there with the least reputable. It's very common practice (because no one seems to get punished) to quote low rates on websites and in advertising materials (including emails and phone conversations) to quote the qualified rate while failing to explain that many cards aren't qualified and higher rates will apply; while failing to disclose all fees. Before entering into a contract, read it, because the rates quoted in writing are the rates that will show up on your monthly statements.

Work with a reputable source like MicroPay Card Services. Every last important detail is disclosed. There are no hidden fees and the terms are straight forward. Combined with Best Consignment Shop Software it's possible to pass credit-card cost on to consignors and buyers, letting those who benefit from using credit cards participate in the expense.


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