Q: We're starting a fence-building company. The prices for our services will range from $200 to more than $10,000. The typical homeowner is not going to have ready cash to pay us, so how can we set up to accept credit cards from customers?
A: Provided by David McAlhaney, senior vice president of the credit card division of American National Bank in Rosemont, Illinois.
There are a number of events that occur before you can obtain credit card processing services. First, you must submit an application to a financial institution for credit card processing. There is usually a charge of $75 to $200 per application. The financial institution will inform you if you are approved within three to five business days.
The primary risk for a financial institution in providing credit processing services to merchants is chargeback losses if customers return items. If a customer disputes a charge with a merchant, he or she can contact the credit card issuer to request a credit to his or her account. Or if the merchant goes out of business, the financial institution is responsible for the charged amounts. To lower its risk, a financial institution considers several factors when evaluating your application:
- Will all credit cards be electronically authorized?
- What types of products or services are you selling?
- What is your financial condition and the financial condition of your business? Are there any current or past liens or bankruptcies against you or your business?
- How long have you been in business?
- What prior experience do you have in managing a business?
- What type of refund or return policy does your business have?
- What is your anticipated credit card volume?
After you're approved, you can purchase, rent or lease credit and debit card processing equipment from your financial institution. Prices vary depending on the type of equipment, but for a terminal, printer and debit PIN pad, prices range from $900 to $2,000. If you don't want to part with that much cash, consider leasing equipment with an option to buy.
After you choose your equipment and payment plan, your salesperson installs and downloads proprietary software into the terminal for credit and debit card processing. You will then be trained on the equipment and taught Visa and MasterCard operational rules and regulations.
Ongoing expenses include per-item costs, which typically run 20 to 35 cents per credit card transaction and 40 to 60 cents per debit card transaction. You may also pay $10 to $15 for your monthly statement and $10 to $20 for chargeback fees.
American National Bank, fax: (888) 640-4262, (847) 430-5018.