When you start a business there are just so many things that one must consider. Now a days with physical cash money becoming more and more obsolete, payment processing is a MUST. There are very few if any places that are cash only so being able to process a payment via credit or debit card is crucial. Many businesses start taking payments via card using a payment facilitator and that is perfectly fine. Most payment facilitators charge a flat fee for processing a payment so you know what the charge will be upfront.
Unfortunately, as your business grows the expense of using a payment facilitator can outgrow its value and convenience. As a business owner it is important to save money responsibly without cutting corning. Looking at the largest expenses of your business can help you address and reduce these expenses, but what are they? People are often surprised to find out that the fifth largest business expense is payment processing.
The Pros & Cons of a Payment Facilitator vs. a Merchant Account
Payment facilitator are easy to get but you do not have ownership of the account. With a payment facilitator you are just using another companies’ merchant account. The money you collect everyday goes into their account then gets distributed. They can hold funds up to three months. I think it is safe to say NO ONE wants to wait 3 months to get their payments.
If your processing volume is low a payment facilitator is a great place to start. Building up a processing history helps when you eventually apply for your own merchant account. Having your own merchant account does away with waiting time referenced above and saves on the additional fees charged by the payment facilitator.
When Is the Right Time to Apply for My Own Merchant Account?
Dan Housman from Payroc, during his appearance on Barbara Talks Business Podcast explained that if you are processing between $2,000-3,000 a month it is time to start looking for your own merchant account. The flat rate once you get above the $2,000 or $3,000 mark can get pretty costly.
If you aren’t sure how to apply for a merchant account or want an analysis of your current processing statements Dan Housman would be a great place to start. Knowing the difference in fees/costs of a merchant account vs. your current payment facilitator can save your business hard earned dollars now and in the future.
Amber N. Waggoner
Amber Waggoner is a former Illinois family law attorney, where she practiced law for nearly 10 years in the cook and will county courthouses. She now serves as the administrative assistant for Fuse Empire which is owned and operated by Barbara Carr. She has a passion for helping to find new and innovative ways to operate, magage, and grow your business.