Merchant Agreement: Basic Aspects

The basic questions which you should not be afraid to ask when you are looking at your merchant agreement are as follows.

  • What are the hidden costs? Pose precise questions concerning potential hidden fees. Particular attention should be paid at application fees, setup fees, the cost of annual subscription, IRS fees, payment card industry (PCI) compliance issues, batch processing fees, statement fees and minimal monthly processing volumes. True, these costs look justified, but they do present a problem if you do not clearly see what you are paying for. All costs, you are going to incur must be clarified from the start, don’t present your partners with an opportunity to surprise you in future.

  • What are the contract charges? Try to reduce the mandatory costs included in your contract to the minimum, and make them clear up front. The cost of contract termination, advance notice requirements, auto-renewal clauses – these are the few details you should clearly understand in order to avoid unnecessary money losses in future. Ideally, you need to look for partners, which are ready to sign the agreement on a monthly basis and grant you the opportunity to cancel the contract at any time. These tips are particularly relevant if your business is a new one, if you cannot expect stable revenues, or you are not sure, what you might potentially need in the nearest time.

  • What are the transaction rates? As you might know, the interchange is the part of transaction processing costs, which will remain unchanged under any conditions (no matter, who is your provider), but the other part, i.e. the markups, are negotiable. The interchange is charged by a given credit card company for processing of every transaction. Percentage of markups in relation to the total transaction amount may vary 10 to 30 basis points. Keep a closer look at the contract, understand, what the markup sum is, what the discount rates are, make sure that you know, where these fees are specified in the agreement.

If you make an informed and competent choice, it can save you time and efforts, and reduce your merchant services costs by approximately 40 percent or more. At Payment Gateway Software we have a team of specialists, who will gladly assist you in your choice of a merchant services partner. Contact us, and we will help you make the best choice.