Payment Processing Fees—How Do They Fit Into Your New Business Model?

merchant account for new business

Payment Processing Fees – Merchant Account for New Business

As a new business owner, you know that the logistics of getting your business up and running raise many questions. Likewise, you’re learning about merchant card processors, and how the costs of accepting credit cards factors into your overall financial planning. Even the smallest, most mobile business benefits from the ability to accept credit and debit cards, but those new to the concept often balk at how those transaction fees cut into their bottom lines.

Pros and Cons:

Let’s take a look at two different models of addressing this issue and examine the pros and cons:

Scenario A

A new entrepreneur, who we’ll call Mr. A, is just starting out, and does his research for the most competitive merchant account solutions. Though he’s not thrilled about credit card transaction fees, his research tells him his rates are reasonable in comparison with the rest of the market. As a result, he tailors his pricing structure so that it accounts for both his profit margin and his transaction costs. He keeps his prices fixed, regardless of the method of payment, which follows the model of most businesses, large and small, within his community. However, Mr. A. worries that he can’t price his services as competitively as he hoped, so the coming months will be a learning curve of balance costs versus profits. The benefit is that Mr. A’s customers have the straightforward transactions they expect.

Scenario B

This entrepreneur, who we’ll call Mr. B, goes to set up a merchant account for a new business, and he feels frustrated at what he perceives to be unreasonable transaction fees. He feels like it will damage his bottom line, so he develops a plan to bypass those fees: he’ll price his services as he believes best, but if a customer wants to pay with a credit card, he will add the cost of the transaction fee to the customer’s invoice. While this may encourage some customers to pay with cash or checks, Mr. B is neglecting the reality that our society is now almost exclusively operating on electronic payment alternatives. Likewise, he’s probably damaging his image and goodwill with customers.

What This Means for You

As you approach your own merchant bank account and payment processing, you need to take a careful look at how they will fit into your overall financial operations. AVPS offers incredible rates and comprehensive payment processing solutions, and we can help get your business off to a great start. To learn more, contact a representative today!

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