People who have credit cards might have accepted that they need to live with the fees associated with them. After all, the convenience might be worth the hassle. They swipe their card at the store or input their details on a website, and they can go on retail therapy. But what many business owners have in common is that they are not aware that it is possible to set up a no monthly fee merchant account.
This means that shops can set up payment channels on their platforms without any hidden fees. That frees up a lot of resources that can be allocated for other purposes. In running a business, you must be strategic when it comes to managing funds and ensuring profit. And while a processor with no monthly fee might be lucrative, do not just use one without knowing how they operate.
What are monthly credit card processing fees for anyway?
The purpose of monthly credit card processing fees is a subject that is touchy for some. Business owners chalk them up to being another “useless cost,” but the truth is they do have their purpose. Payment processors charge monthly fees because they do not get a portion of your income. Everything goes directly to your pockets.
For the processors to make their own money from transacting with you as clients, they use monthly fees. These are subscription-based, similar to the streaming services you use for music or television shows.
How are the monthly fees usually structured?
The thing about credit card processing is that sometimes, there are factors outside the processor’s scope. Keep in mind two other players in each credit transaction: the financial institution and the credit card network. Some people interchange the two because of how similar they sound in terms of function. They have their roles to fulfill.
The financial institution or the bank is responsible for giving the cardholder the power to use their services. On the other hand, the credit card network provides the mechanism for banks and their clients to transact through a system. Examples of networks include Visa and Mastercard.
Processors interact with these two other parties to allow merchants and their customers to complete a transaction. To make a profit and continue offering their services, most of them have membership fees charged through tiers or a flat rate.
Tiers function like bundles, where certain types of transactions are categorized. These are difficult on the merchant’s part because the processor might not be completely transparent about how transactions are categorized. There is the possibility that some sales might be tagged at the highest tier for the processor to make more profit on their end.
On the other hand, a flat rate happens when a merchant pays a fee for each credit transaction. This does not change even if the value of a sale is high. This can be expensive when they pile up. Sometimes, processors even add another fee on top of the flat rate.
While there are no processors that are completely free of charge, there are those that do not charge a monthly amount to their clients. Setting up an account with these providers is done through their websites. Instead, they make a profit through startup, installation, and other fees. These are discussed in the next section of this piece.
Should our business go for a processor without a monthly fee?
Looking at the most affordable option might be the natural choice for most business owners. However, one has to consider what it entails for your business carefully. After all, what works for a small shop might not work for a larger one. The volume of transactions per day varies, and there are certain advantages to sticking to the tried and tested monthly fee system. Of course, it is not the only way to set up a payment channel because there are cheaper alternatives.
Monthly fees may pile up on top of existing business costs. Exploring other options will allow you to focus on existing credit processing fees, such as transactional fees. In addition, having no monthly payments also means fewer contractual agreements with the processor.
Keep in mind that there is already a whole slew of fees associated with processing. These costs are how processors with no monthly payments operate. You have to pay for the account, installation, equipment, and customer support. At times, there are also other expenses that you might have missed. For instance, some services have a “statement fee” or a terminal lease. Taxes might also factor into the equation.
Thus, it is essential to go through these values as well. Ensure the lack of a monthly fee does not blind you because the other expenses might roughly add up to the same amount. If you are interested in processors of this nature, one of the most popular options is Square, Stripe, and PayPal. Each has its process of setup, accessible through their respective websites.
What are my next steps?
If you are a business setting up your payment channels, make sure you explored all the options at your disposal. Think of the costs you already pay for, such as your materials, marketing fees, and other expenses. Factor these into your decision on what payment processor to choose for your business.
The goal is to make every aspect of your business an asset. In this digital age, ventures can quickly lose steam. Keeping customers satisfied with a suitable payment method is essential, but you must also make sustainable decisions for the good of your business. Do not be afraid to ask processing companies about their tiers and flat rates, as this can be very helpful in coming up with a decision.
Remember that transparency is the best indicator of a good partnership. Having a provider that is upfront with you about all the costs relating to credit card processing is a sign of respect. If you decide to explore a no monthly fee merchant account for your business, make sure it is with a reputable and trusted provider.