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!
