So now we understand what a merchant service provider is, how do you choose the right one for your business? There’s a range of factors that might influence your decision. These include:
• Do you need EPOS? Remember that your merchant account may be tied to your EPOS system. If you need EPOS equipment, make sure that you take into account the specific costs associated with that, for example hire fees or initial cost. For more information, read our guide to Point of Sale systems.
• Transaction types. Most merchant accounts will allow you to accept most or all of the payment types you’ll need. However, you should check to see whether your potential choice allows for things like telephone payments. Remember, too, that American Express transactions are treated differently.
• Processing fees. This is the big one. Credit and debit card transaction fees typically range anywhere between 0.5% and 3%. You may also be charged an authorisation fee of around a few pence per transaction. Compare prices and don’t be afraid to negotiate.
• Minimum monthly fee. Some providers will require you to spend a minimum amount on merchant fees per month. So, if your monthly minimum is £15 but you rack up fees of only £10, you will still be charged the full amount of £15.
• Minimum contract length. It’s important to check if you are tied into a contract and, if so, for how long. Contracts with merchant account providers typically range from one year to four years and can be very costly to terminate early, so make sure you know what you’re signing up for. Also, beware that with some providers your contract will automatically renew unless cancelled well before the initial term expires. If you’re looking for flexibility, then some PSP’s, such as iZettle, Square, and SumUp offer contracts with no minimum term.
• Chargeback fees. Chargebacks occur when customers dispute a card charge, for example due to fraudulent activity. You will be charged for the full amount of the transaction as well as an additional fee of around £15 on top.
• Hidden fees. Beware that some providers will charge extra fees on top of those already mentioned. These can include set up fees as well as PCI compliance fees. PCI compliance is a legal requirement for businesses that handle card payments and typically costs between £2.50 and £5 per month.