It almost never happens these days, but sometimes on rare occasion, you do run into the odd small store that doesn’t accept plastic. And the ones that do almost always have a $10 minimum purchase rule. Why is it hard for some merchants to accept credit cards then? It’s not difficult to come by credit card processing or even a merchant account. There are banks and all kinds of other merchant gateway businesses that fall over one another to offer new merchant accounts to small businessmen. The problem lies in how they charge very high rates of fees for their services. To a small businessman who will accept credit cards, merchant account fees are the bane of their existence.
To the average small businessman who sets up to accept credit cards, merchant accounts require a monthly fee and also a percentage charge that can go as high as 8%. They call the percentage a discount fee for some mysterious reason. Not only do they not give a merchant a discount for doing business with them, they charge them a commission for the amount that they process. Let’s say a customer charges up $80 to a credit card. The merchant will first have to pay a transaction fee that runs to about 50 cents. On top of that, they will pay a percentage commission, and a discount fee of perhaps 5% (but possibly as high as 8%). And then each kind of credit card they accept comes with an yearly charge. That $80 purchase might cost the merchant $5 in processing fees alone in the end. And of course, if the customer returns what he bought a couple of days later, there is a chargeback fee too. Those credit card processing firms became such behemoths on the backs of businessmen around the world who pay them dollars and cents all the time.
There are options of course. There are Internet companies like CCBill that act as third-party billing agents. They are cheaper and that they don’t charge setup fees or gateway fees. All they do is to charge a small 2% fee on the amount they process and charge about 35 cents per transaction. When the credit card majors like Visa found that they were losing millions of dollars having one middleman act as go between, they began to try to find other places they could make up for the loss. Of any Internet website that directly accepts Visa, they will now charge a monthly $1500 fee. That’s simply crazy. Businesses can still accept credit cards from Visa: they can go to companies like CCBill. There is another option that small businesses have now – and that is PayPal. With all these services at their disposal, businesses can accept credit cards; merchant account fees no longer have to be as high as they used to.