Credit Card Processing in a Small Business

Shonuff

Shonuff

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Any advice here? We've always done cash and checks only, but I think it's time to make the leap. I'd like to be able to swipe the card from a smart phone. I know jack about this. I'm assuming you pay Visa/MC 5%, and then another 3% to the company that handles the phone transaction? That's a pretty big hunk of cash, considering most businesses only take home 5% of revenue as profit. Also, what companies are paying quicker, and which ones sit on your cash forever?

I'm looking for any sort of tips on this. I'm assuming the only two issues are minimization of fees and time to funding. Let me know if I'm missing anything.
 
lurkingdirk

lurkingdirk

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Go to paypal.com and check out their offers. They're fantastic - I use them a lot, and they have no hidden fees. You know exactly what you're going to pay, and it's way lower than most credit card costs. They also provide a free card-reader for your smart phone. Don't be fooled, paypal isn't just using your paypal account to pay for things, they accept credit cards, too.

I highly recommend it.
 
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Corndog

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I use squareup.com It's a flat 2.75% and works on any smart phone or IPAD with an internet connection/GPS.
iness
The thing to research for your specific business Lyrical is the transaction caps. Some of them only let you do like 10k a day until you prove you're a legit business etc. It's to protect someone getting a list of card numbers and just going to town.
 
Lenas

Lenas

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Use Square, it's the most common and probably most trusted. Android / iOS, 2.75% per swipe and next day deposit.
 
Shonuff

Shonuff

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Corndog_sl said:
I use squareup.com It's a flat 2.75% and works on any smart phone or IPAD with an internet connection/GPS.
iness
The thing to research for your specific business Lyrical is the transaction caps. Some of them only let you do like 10k a day until you prove you're a legit business etc. It's to protect someone getting a list of card numbers and just going to town.
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Someone was telling me about an app where the Estimator writes up the estimate on the Ipad, it gets stored online, and is processed. The customer goes online and approves the job (so they can't deny they did later), you get their email info for newsletters, the crew leader can pull up the job from his phone (so paper involved), and when the crew leader hits the button on completion of the job, the invoice is automatically sent. Pretty damn smooth.

Lenas_sl said:
Use Square, it's the most common and probably most trusted. Android / iOS, 2.75% per swipe and next day deposit.
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Next day deposit would be nice. But correct me I'm wrong, Visa/MC take 5% also, right?
 
Void

Void

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Lyrical_sl said:
Someone was telling me about an app where the Estimator writes up the estimate on the Ipad, it gets stored online, and is processed. The customer goes online and approves the job (so they can't deny they did later), you get their email info for newsletters, the crew leader can pull up the job from his phone (so paper involved), and when the crew leader hits the button on completion of the job, the invoice is automatically sent. Pretty damn smooth.
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If your jobs almost never vary from the quote I could see where that is useful, but depending upon the business that could be a huge nightmare if you have to go back through all those steps to do a change order, update the quote, whatever. Of course, I've never used this app you're talking about, so maybe it is simple to do all of that as well. Might be, as I'm sure it has come up often enough for people using it. Still, I'd be a little wary of having people not familiar with the sales end of things (i.e. the guys doing the actual work) hitting the "done" button and having an invoice generated instantly.
 
Shonuff

Shonuff

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Vvoid_sl said:
If your jobs almost never vary from the quote I could see where that is useful, but depending upon the business that could be a huge nightmare if you have to go back through all those steps to do a change order, update the quote, whatever. Of course, I've never used this app you're talking about, so maybe it is simple to do all of that as well. Might be, as I'm sure it has come up often enough for people using it. Still, I'd be a little wary of having people not familiar with the sales end of things (i.e. the guys doing the actual work) hitting the "done" button and having an invoice generated instantly.
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A few times a week, the order changes. Today, a job went from $500 to 1,500 because the customer decided to add more work when the crew was working. You are right, that might be an issue on an Ipad. What I've heard of people complaining about is on the actual estimate. If you need to draw/do a diagram of the property, that might be a problem. I'm pretty sure it uploads the paperwork to your bookkeeper automatically.

It sounds great conceptually though.
 
Araysar

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We do $2,000,000+ annually in credit card transactions.

I can give you a few pieces of advice.

1. Never rely exclusively on Paypal. They are prone to "holding" your money for indefinite periods of time for "fraud prevention" reasons. They held over 200K of our money once for 9 months and screwed up our cash flow pretty badly. And legally they can do that because they are technically not a bank, so they dont have to follow bank regulations.

2. Go talk to your bank first where your business accounts are. First of all, if its a large bank (we use PNC) they can typically offer you a better rate than any third party (like authorize.net). Time to funding is 2-4 days. The best part however is that using your bank as a CC processor gives you leverage in the future for other things: loans, line of credit, etc. The more money you are cycling through a bank with your business accounts, personal accounts, car loans, mortgages, anything - the more important you are to them. However, never be afraid to walk away if you can get a better deal elsewhere. Commercial banking is very competitive, and its not easy to land business accounts for them.

2 years ago, I negotiated with our bank into a 1.98% rate + $0.35 per transaction or something to that effect. If you are paying anything more than a 2.5% cumulative, and you do more than 10K in charges per month - you are getting ripped off.


Let me know if you have any other questions, and I'll try to help.
 
Araysar

Loser Araysar

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Lenas_sl said:
You'd have to read up on their costs and fees page... Seems to me that depends on what state you're in.

https://squareup.com/help/en-us/arti...costs-and-fees
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There are no hidden fees. Every card accepted (Visa, MasterCard, American Express, Discover, debit and rewards cards) has the same rate. Credit card company fees are included in this rate so you will not incur any charges from credit card companies. With this plan, there is no fee when you do not use the service and no penalty for being inactive. Fees are taken out of the total amount of each transaction, including tax and tip.

This place sounds like a total ripoff. AMEX processing charges are always in 3%+, VISA, MC and Disc are around 2.5%. Since the vast majority of your business is with Visa, MC and Disc. it seems disingenuous to average all four of them out into a higher rate.

The Dodd-Frank legislation also created specific rules that made charging debit cards a lot cheaper. Charging the same for a debit transaction, as you would for a credit transaction is also bullshit.http://www.entrepreneur.com/blog/223480
 
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Corndog

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So far a month in. I love square. I can take any card, it's all the same to me. People actually like using their rewards cards to pay for stuff. I just build in the 2.75% into my prices and offer a 3% discount for cash if they want it.

So far I have no complaints. I've put roughly 3k through square so far, with 100 transactions through their point of sale software. Some being cash, check, credit etc.

Different processors will have different structures. For a small business like myself, the no extra fees etc make sense. For a company charging 50k a month. the $40 in fees for terminal, etc are nothing. Also 35 cents per transaction will kill a gas station, but be nothing for a lawyer etc.
 
Shonuff

Shonuff

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Corndog_sl said:
So far a month in. I love square. I can take any card, it's all the same to me. People actually like using their rewards cards to pay for stuff. I just build in the 2.75% into my prices and offer a 3% discount for cash if they want it.
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With Square, if you use Visa/MC, your total fees are 2.75%, or is it that +~3%? I can eat 3%, but not 6. There are times of the year (namely December and January), or certain jobs (like for charities), where I work at cost.
 
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Corndog

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its 2.75%. No matter if they use visa/mastercard/discover etc. No matter what rewards program the card is etc. so If I charge 1000 dollars. They keep 27.50 of it. No other fees at all.
 
U

Unidin

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Square with a larger transaction volume is a waste of money. Araysar is right. Go to your bank first and see what they can offer. Full disclosure I work for Chase bank. We own our merchant processor and because of this, we do next day funding of your payments if you also bank with us. If cash flow is an issue for you, this is a huge step up from normal 2-4 day funding.

Sams/Costco also offer merchant processing which is really competitive.
 
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Corndog

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I went to my bank etc. The rates couldn't compare to square. Here's some of the tactics by chase.http://www.bestmerchantrates.com/no-...-tier-pricing/

Also don't forget the $10 terminal fee each month. And the 7.50 fee for getting a statement each month. etc. Also the fee per transaction. 23 cents on $4 worth of groceries is alot. Like I said, knowing that every transaction is 2.75% is worth something to me. Its simple and effective. If they use their costco card with the rewards program, it'll cost 2.75% not some crazy higher number. etc.

I'm not saying that other payment processors aren't usable. But you need to shop around for which one will work for the type of transactions you're doing.
 
opiate82

opiate82

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I think I might have covered this in Corndogs thread, but dealing with merchant processors can be a pain in the ass. There really is no industry standard when it comes to language and structure of the contracts. They can be nearly impossible to decipher and really the only way to tell how much they end up costing you is to use their service for a couple of months and calculate your effective rate.

I do about $1 mil in credit card transactions a year and have an effective rate of about 2.4%. Keep in mind, rates can differ per industry and based on not only the dollar amount of the of transactions you do, but actual number of transactions. Right now I use People's Bank. Typically Visa and MC get my money to me in 2 days. AmEx takes 3-5 and they aren't very consistent. Also most businesses seem to use AmEx and their rate is higher.

Also in the past I have used Hartland and Mercury Payment Systems and both of them also had similar effective rates. With any processor you have to carefully watch your statements to ensure they aren't trying to sneak in fees or one-time-charges that they are hoping you will just overlook.

If you plan on storing clients credit card numbers than prepare for all kinds of headaches in ensuring data security (PCI compliance).
 
Shonuff

Shonuff

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So Square only allows you to manually deposit up to 2k a week, and if you do more than that, they hold it 30 days? We get approvals over the phone. Last week, we had at least 10k in approvals over the phone. That might not be good for me.
 
U

Unidin

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Corndog_sl said:
I went to my bank etc. The rates couldn't compare to square. Here's some of the tactics by chase.http://www.bestmerchantrates.com/no-...-tier-pricing/

Also don't forget the $10 terminal fee each month. And the 7.50 fee for getting a statement each month. etc. Also the fee per transaction. 23 cents on $4 worth of groceries is alot. Like I said, knowing that every transaction is 2.75% is worth something to me. Its simple and effective. If they use their costco card with the rewards program, it'll cost 2.75% not some crazy higher number. etc.

I'm not saying that other payment processors aren't usable. But you need to shop around for which one will work for the type of transactions you're doing.
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My advice was directed more at Lyrical. 23 cents a transaction doesn't mean anything if you're getting a lower rate on large transactions. For a grocery store, a per transaction fee is a big deal. However for someone that processes much larger transactions, the percentage is what matters. My point wasn't to shill for Chase specifically and like any other merchant processor, pricing is flexible based upon negotiation.
 
Jalynfane

Jalynfane

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There is a huge complaint site for square, with the complaints being money holding by square for up to 180 days. It looks like, after reading them all, most issues were when the merchants volume would spike up, and square automatically thinks this is fraud so they freeze the account. They also do not have a listed customer service phone number, you have to email them your issue and wait for a reply, typically 3-5 days.

Intuit's GoPayment for mobile swiping of cards is looking like what we might end up doing for our thing. The fees are a bit different for normal debit/credit vs rewards cards but If I plan on 3.5%+15 cents on each transaction that is something we can count on and build it in.

Square complaint index info:http://www.cardpaymentoptions.com/cr...square-review/
 
Shonuff

Shonuff

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Jalynfane_sl said:
There is a huge complaint site for square, with the complaints being money holding by square for up to 180 days. It looks like, after reading them all, most issues were when the merchants volume would spike up, and square automatically thinks this is fraud so they freeze the account. They also do not have a listed customer service phone number, you have to email them your issue and wait for a reply, typically 3-5 days.
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Screw that. My busiest month is like 500% of my slowest month. And not having a help line is a joke.

Thanks for the info so far, guys.
 
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