Card Processing & Fees Clearly Explained
“When will funds be posted to my account?” That’s the second most popular question that merchants have (after “What are my fees going to be?”).
So that takes us into batch processing and understanding why it takes time for the money to hit your account after the transaction is processed.
Yes, the transaction has been approved, but the system has to process the money amount designated in the transaction. And it takes time to move the money from the customer’s account to your account. This occurs in “batches,” which are run overnight or in 48 hours. And in certain conditions, it can take even longer.
One of the things that affects the amount of time to put money into your account is the risk involved. High-ticket items (e.g. jewelry) or an online boutique that uses MOTO transactions could see longer batch times.
A good way to help your funds arrive as quickly as possible is to pay attention to your cut-offs. The network you’ve contracted with sets these deadlines. For instance, is it 7 pm or midnight? If you don’t have your transactions in by that time, next-day funding is not possible. You are now stuck with a two-day wait or more.
For businesses that do not have many credit card transactions, it can make a lot of sense to use an aggregator like Square, PayPal or Stripe.
An aggregator has its own merchant account. And, for a fee, it sells access to this account to smaller merchants. The aggregator creates the transaction pipeline and deals with Interchange and fees. In return, it charges those who use its platform a flat fee per transaction.
As you might imagine, this fee can be more expensive on a per transaction basis than having your own merchant account. But, when you do not have many transactions to process, you still save money overall.
At some point, your credit card transaction volume will grow and it may be time to check into having your own merchant account. We suggest this “conversion threshold” is at $3,000 per month in total sales by credit card. If you’ve grown to running more than $3,000 per month via card payments, consider shopping for an ISO to review your card processing options.
A couple of other things about aggregators. Your sales money first goes into their account, not yours. They could hold your money for many days. Sometimes you have to pay a higher fee to get your money moved to your account in a more timely fashion.
Also, when your customer views his credit card statement at the end of the month, if you’ve used an aggregator, their name may appear on that statement next to an abbreviated version of your business name. That may or may not be an issue for you.
Aggregators do have their role in the card processing industry. Just be sure you understand the pros and cons thoroughly.
Our final blog in the credit card processing explained series covers how you can save money. We look at the options you DO have in order to cut down on those transaction fees.
A sample of what you'll learn each month: