Canadian Merchant Accounts - The Critical Merchant Account Guide

Are you shopping for a Canadian Merchant Accounts? Most Canadian small business owners don't know what questions to ask Credit Card Processing Companies, resulting in many owners being shocked by the true costs when bills begin to arrive.

Before you make any agreements you may want to consider the following:

1. What are the Credit Card Discount Rates?

Don’t just find out what the ‘card-present’ or ‘qualified’ rate is, find out what the: ‘non-qualified’ and ‘mid-qualified’ rates are too. Many merchant account providers use marketing tactics and it can be deceiving sometimes if taken at face value. ‘Mid’ and ‘Non’ qualified rates are usually much higher then card present ‘Qualified’ transactions. You would be naïve to assume that all your transactions will be ‘qualified’ - all business's will produce some each type of card processing and by not knowing what % of your transactions fall under each umbrella of discount rates can cost your dearly.

2. What are the Transaction Rates?

It is become more common that any transaction that is made on your point-of-sale terminal will be considered a transaction and a fee will apply, whether is it is a void, debit, credit card, refund, batch close, etc.

Transaction fees can range from 0.05 cents up to 0.50 cents and can be different for each type of transaction, although typical Point-of-Sale Terminal transactions fees are between 0.08 cents to 0.15 cents.

Non Point-of-Sale card processing services like IVR, PC, & E-commerce processing transaction fees are usually much higher ranging from 0.35 cents to 0.50 cents.

3. What is the monthly cost for the Point-of-Sale Terminal?

Point-of-Sale Terminals are known as: Interac Terminals or Debit Card Machines or Credit Card Machines, but in the industry they are known as a Point-of-Sale Terminals and will be referred to from this point forward as “POS Terminals”.

Traditional Retail POS Terminals can hook up via a regular phone line (Dial-up POS Terminal) or a DSL High-speed Internet connection (IP POS Terminal) , and more recently to the Wireless Data Network making some POS Terminals wireless and mobile (Cellular POS Terminal).

Most Traditional Retail type business’s only need a regular Dial-up POS Terminal or an IP POS Terminal. Dial-up will work for the Merchant who does under 25 transactions a day. A Merchant who does a high volume of transactions and needs to move customers through a check-out line quickly should consider using an IP POS Terminal.

Most Bank related card processing companies offer a ‘rental ONLY program’ for POS Terminals. Rental costs can range from $20 right up to as high as $100 a month depending on the type of Point-of-Sale Terminal your business requires.

Private label card processing companies usually only offer a ‘Lease-to-own or Buy option’ program on their POS Terminals. Lease-to-own usually run on 48 month leases with a 10% buy-out option at the end. Lease-to-own POS Terminal prices range from $30 - $80 dependent on type of POS terminal. Buy-out POS Terminal prices, typically run from $999 - $1800 (without taxes) dependent on type of POS Terminals.

Two very important questions to ask before buying a POS Terminal:

* What are the warranty conditions?

* Is the POS Terminal smart-card ready?

When renting a POS Terminal if you require a new POS Terminal is usually will be fixed or replaced at no cost to you. However, you pay rent forever. If you have been renting a POS Terminal for $40 a month for 5 years, then you just paid $2400. If you have been renting a POS Terminal for 10 years at $40/month then you just spent $4800 & no asset in your business. You can own a basic POS terminal for as little as $1000 and now have another asset in your business.

In terms of warranties, most private label companies will offer some type of warranty on the POS Terminal, sometimes at no extra cost, sometimes for an additional fee. There are even a few payment processing companies that offer a life-time warranty all inclusive in the original retail purchase price. Sometimes it is better to pay more for an all inclusive warranty on hardware with free software upgrades then to pay less with a limited warranty.

4. What are the Set-up Costs?

Every debit and credit card processing company will have set-up fees, some more then others. Set-up fees can range from $50 - $300. Usually the set-up fees are one-time only set-up fees for Visa, MasterCard, Amex, & Interac cards usually around $25 per card. Some companies also charge an initial set-up fee for programming the POS Terminal or a fee for initial training. Set-up fees can greatly vary from company to company.

5. Are there any Application fees?

Not all payment processing companies have an application fee, however, some companies do. This is usually a non-refundable fee, whether your business is approved or not. Applications fees can vary from non-existent to $300.

6. Is there a Statement Fee?

Not all payment processing providers have a statement fee, however, some do. The average statement fee is usually around $5 or free if you are willing to receive your statement coming to you via e-mail. (I am not sure if this is a nickel and dime fee or if it is companies trying to go green? I let you decide!)

7. Is there any Minimum Processing Fees?

All payment processing providers have minimum processing fees, ranging from $5 - $25. Often there are minimum processing fees for each type of card you intend to have processed. Basically, what this means is if you do not do enough business sales to have high enough fees you will still pay a minimum every month.

For example: Let say your discount rate 1.85% on Visa and your do a $1000 worth of sales on Visa that month and your minimum processing fee is $10.

Well, 1.85% X 1000 = $18.50 in fees that month on Visa. Therefore, you have cleared your minimum of $10 and you have nothing to worry about.

Now if you take the same rate and minimum, but you only made sales $250 that month on Visa. Well, 1.85% X 250 = $4.62 in fees that month on Visa. Therefore, you did not make you minimum and would be required to make the difference up of $5.38.

8. Is there a Gateway Fee?

Most card processing providers usually have a gateway fee, but usually only for IP POS terminals, PC and E-commerce payment solutions. Gateway fees can range from $5 to $75 a month.

9. Is there a Monthly Maintenance Fee?

Some card processing service providers have a monthly maintenance fee others do not. If they have it, it is usually a fee that is associated with IVR, PC, & E-commerce payment processing solutions, however, some companies have it on POS Terminal solutions too.

10. Is there an Added Value Fee?

Some payment processing service providers have a monthly added value fee and some do not. This fee usually ranges from $5 - $10 a month.

11. Is there a Chargeback Fee?

Most payment processing providers have a chargeback fee. Chargeback fees can range from $10 - $50. A chargeback is when a card holder holds a dispute on a Visa or MasterCard or Amex transaction that came from your business. If the card holder wins the dispute, they will be refunded their money and you will be charged a chargeback fee, a similar fee to bouncing a cheque.

It is always the merchant burden of proof to prove that the card holder had used or bought the product or services from your business. This is why is so important to check that on credit card purchases that the signature matches the back of the card holders credit card and if it does not to ask for photo ID.

12. What are the Technical Support Service Hours?

Most card processing companies have a help desk/technical support. However, not all are 24/7 and some are better then others. The best thing to do is to get the help desk number and give it a call a few times through out a day to see what kind of service you would get.

13. How soon can you have a new POS Terminal in my Business if my POS Terminal is not working & can be fixed via the phone?

Payment processing providers can vary on this from company to company. Some can have one to you within 24 hours others can take 2-4 weeks before they have a new POS terminal to you. The question you have to ask yourself is how long can your business run without one in your business? Sometimes it is better to pay more for better services.

13. How long does it take to initially get set-up with full services?

Most card processing companies usually take at least 2 weeks (sometimes as long as 4-6 weeks) to have your application processed, merchant accounts set-up, point-of-sale terminal programmed and shipped to your business ready to use. However, there are a few payment processing companies that can have one ready in your business in as little as five business days. These are usually private label payment processing companies.

15. How long is the agreement/contract for?

Most merchant account companies have a standard 3 year agreement and it is usually around $200-$300 to terminate this agreement early. However, there are some companies that will have 5-10 year agreement in their terms and this can be just little too much of a commitment for anybody. Also, some companies have ridiculous cancellation fee as high as $1000. So read the fine print and do not take a sales rep’s word for it.

If you manage to get all the above questions answered, then you should be in pretty good position to make an educated decision on which company would be the best payment processing solution for your particular merchant account needs.