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Third Party Credit Card Processing
There are many advantages in accepting credit card payments on your website. However, if your business is small banks can be wary about granting you a merchant account as they are considered more high risk than a more established or larger company. Therefore, many small businesses turn to third party for their credit card processing needs. It is estimated that around 85% of businesses are now using this service.
It is essential to spend time searching for a reputable credit card processor who meets all of the requirements for your business. The cost can vary widely between processors. For instance, some companies take only a small percentage of each credit card transaction made but they may look to make there profits elsewhere, such as charging greatly inflated sign up fees. Other processors do not charge a joining fee but you will be paying more per transaction for the privilege of using their services. If your business is very small, for example if you are a sole trader running a business from home, you will need to find out from the credit card processor if they charge a minimum monthly charge
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Which of these options proves most cost effective to your business will depend on the nature of your business and your company turnover. If you have been refused a merchant account with a bank but your company receives a steady number of orders each month and you are making a good profit, paying a sign up fee but enjoying better discounted rates on each transaction could be the best financial option for your business. Conversely, if your business is new and its money making potential is not yet established, or if you only make a small number of sales each month, the more cost effective option may be to pay more per transaction but avoid paying a sign up fee. If the third party merchant charges a minimum fee for their services each month and you have a low turnover, you will need to assess if your profit margin justifies the amount you are paying to use their service and maybe consider looking at alternative processors. Look for hidden fees such as statement fees.
Financial concerns should not be your only consideration. While there are a great number of reputable credit card processors available, there are some third party merchants who are just out to make some quick cash. Try to sign up with a company who has a long history and well established track record. If possible, use personal recommendations to find a company with a good reputation. Check whether they will deposit funds to your existing bank account, as some companies will insist you set up an account with their own bank. You will also need to check what sort of businesses the third party merchant is willing to take on. For instance, some will only process credit card transactions for business selling goods which are physically shipped, while others deal only with software authors.
Choosing a third party merchant is an important decision for your business. Make sure you compare the packages offered by several credit card processors before committing to one in particular.
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