Merchant services is the name given to a service that allows businesses to accept debit and credit card payments. A merchant acquiring bank provides this facility though merchants will commonly deal with an independent sales organisation.
The way it works is the business sets up a merchant account and can then process card payments. There are certain costs associated with a merchant account:
Account Activation Fee
Paid to set up the account, this may also be referred to as the joining/application/setup fee.
Minimum Monthly Service Charge (MMSC)
The minimum monthly service charge is the minimum a merchant pays every month to have a merchant account. If the total transaction fees are greater than the MMSC the fee will not apply. MMSCs are commonly around £20 so if, for example the merchant’s total transaction fees for the month are £15, they will pay the MMSC.
For small businesses it usually works out cheaper to buy a terminal. If renting or buying you can do so through your merchant services provider or a 3rd party. If buying a machine through a 3rd party make sure the machine is safe and PCI compliant. Also make sure the machine works with your merchant account. You can ask your merchant services provider for a list of approved terminals.
The banks work out transaction fees based on the bank, account type and type of payment. The result is many different rates are payable for card transactions. If the merchant has set up the account through a third party they are likely to have a rate set for different types of transaction and different card types to make billing easier. It is worth investigating transaction fees as many small merchants have been hit hard by high transaction fees for certain types of card.
Early Termination Fees
One fee that merchants are commonly unaware of is the early termination fee. This is a fee which the merchant is liable for if they cancel the merchant account before the end of the contract. Take care to ask the right questions and read the small print as early termination fees cost £100-£200 and can be applied to rolling contracts.
The most important thing about the payment terminal/s is that they are as safe as possible. Every merchant has to comply with international safety standards laid down by the card companies.
Types of Terminal
Countertop: This is the type of terminal you see when you go into the shop or supermarket. They are connected to the till and payments are processed with the bank via a phone line or internet connection.
Portable: These terminals are commonly used in restaurants and bars. They are wireless and payments are processed via transmission to a hub on the premises which connects with the bank.
Mobile: Mobile terminals are used away from the business premises. They connect to the bank via the GPRS signal used by mobile phones. Some devices have their own mobile technology and some process payments via a smartphone or tablet.
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