Getting Started with Credit Card Processing in Your Ice Cream Parlor

Find Credit Card Processors

Gather a list of credit card processing service providers you want to consider. Most local, regional, and national banks offer these services. Some processors advertise in trade publications. You may also receive literature in the mail from companies offering these services. In addition, warehouse clubs like Costco and Sam’s Club offer these services to members through affiliated companies. You will often find your best rates through these warehouse club providers.

Prepare a Short List

Prepare a short list of providers you would like to consider based on:

Advertised Costs

Perceived Quality of Service

Timely Availability of Assistance

(Keep in mind that once things are set up and running, you will need assistance very infrequently. So cost is usually the greatest consideration.)

Obtain Written Quotes

Obtain written quotes from the companies on your short list. When speaking with sales representatives, ask them for their best rates for businesses with low average ticket amounts. Sometimes you have to ask more than once, but most large companies have special low rates for fast food restaurants. To get the best quotes, let each company know that you are shopping for competitive rates.

Fee Overview

The fees you will incur from a credit card processor can be broken down into the following broad categories:

1) Per Transaction Fees

Per transaction fees will be the bulk of your charges in a month. You mostly want to focus on these fees when making a decision. Usually there is a fixed component and a variable component per transaction. For example:

$.10 + 1.54%

means that for each transaction, you will pay $.10 plus 1.54% of the transaction total as a fee. For a $5.00 charge transaction this will amount to $.10 + $.08 = $.18.

2) Daily Fees

Generally, the only daily fee is a charge to submit a batch of credit card transactions at the end of the day. You usually want to submit daily because your rates go up if you don’t. This fee might be $.29 per batch for example.

3) Monthly Fees

Monthly fees might include a fee for producing a paper statement, an equipment maintenance fee (if you choose this option), or a fee if you do not meet the monthly minimum processing. If you are a seasonal business, you might want to try to get them to waive monthly minimums for your “down” months.

4) One-Time Fees

There is an initial cost for the equipment. Also, there might be an occasional charge for reprogramming the equipment if you desire a change of some type, or if laws change. These are rare.

Analyze Quoted Fees

Analyze quoted fees closely, particularly those “per transaction” fees. That’s where unexpected charges may be incurred. There are four common categories of transactions:

1) Visa Credit - Will be about 25% of your volume

2) Visa Debit - Will be about 50% of your volume

3) MasterCard Credit – Will be about 10% of your volume

4) MasterCard Debit – Will be about 15% of your volume

Credit transactions are pretty straightforward. The fees are generally as you expect them to be. Debit transactions are a little more difficult. . When you receive a debit card for payment, you can choose to process it as a debit transaction or a credit transaction. To keep it simple, process all debit cards as credit transactions. Why? Three reasons. One, it’s easier because it doesn’t require the use of a debit PIN pad. Two, it’s cheaper for the customer on their bank statement. Three, it’s cheaper for you because usually ice cream shops have small ticket amounts. The fixed amount of the fee on debit card transactions is higher, making them more expensive for small dollar transactions.

Have Sales Rep Calculate Common Fees for You

After receiving quotes, talk to your sales representative to better understand the fees. Ask them how much each of the four common types of transactions will cost you IN TOTAL for both a $2.00 transaction and a $10.00 transaction. THIS STEP IS IMPORTANT! It will help you find out if there are any double charges built into their fee structure. If they resist walking through these calculations with you, they may be hiding something. You may want to have them fax those calculations to you for your files. You might use a format like this:

$2.00 Transaction $10.00 Transaction

Visa Credit

Visa Debit

MasterCard Credit

MasterCard Debit

(Assume debit cards are processed as credit transactions)

Unexpected Charges

Common unexpected transaction charges include:

1) Double Charges on Debits Run as Credits - Sometimes debit transactions get charged twice, but it won’t be clear that it’s going to happen. They make the second charge at the same rate as the first charge. For example, you run a debit card as a credit transaction. They charge you the credit card rate of $.15 + 1.53% on that transaction. Then they charge you $.15 + 1.53% again on the transaction because it’s a debit card. A good provider will NOT have any deceptive double charges like this. The only reason a debit card should have a different fee is if you choose to run it as a debit.

2) Separate Charge for Dial-up Verification – Each transaction requires your machine to dial-up and verify the validity of the card. If a provider has this fee, you will be charged this fee on EVERY transaction. A good provider will not have a separate fee for verification.

Incidental Charges

There are other incidental charges that you will incur from month to month. Generally, they will be small in number, and their overall cost will be insignificant. They probably won’t affect your analysis. These include:

Foreign Cards

Corporate/Business Cards

Small Ticket Debit Charges

Additional Charges if You Manually Enter a Card Number

Transactions That Clear Other Than Priced

Calculate Estimated Monthly Fees

Calculate your estimated credit card fees for a month using each provider’s quotes. A good estimate might assume that 15% of your sales will be card sales and the average transaction amount will be about $6.00 or $7.00.

Compare Estimated Monthly Fees & Choose

Compare the estimated monthly costs of each provider. Choose the least expensive provider with a good reputation. In general, your best choice will be a company that:

1) Has a low fixed transaction charge. That’s the most important part of the equation for ice cream parlors. For example: Fixed $.10 + Variable 1.60% is better than a fee of Fixed $.15 + Variable 1.10% for any parlor whose average transaction is less than $10.00.

2) Doesn’t have doubled debit card fees and doesn’t charge for each dial-up authorization separately

3) Can be flexible with monthly minimums if you’re seasonal

4) Doesn’t have a lot of extra daily, monthly, or transaction charges

5) Has a special lower rate for the fast food industry.

Obtaining Equipment

After choosing your provider, work with them to obtain the equipment you need. You’re usually better off buying rather than leasing if you can afford it. For simplicity and time savings, buy from your service provider. They’ll ship it pre-programmed. If you want to save money, find out from your chosen provider some equipment options that are compatible with them and are good quality. Get the brand name and model information from them. Search the internet for new or used equipment. The kind of machine that uses thermal paper and prints its own second copy can be nice and trouble-free.

Second Phone Line

You will need a second phone line for credit cards. Upon last search, nothing was available to work over a secure wireless internet connection. Also, internet connections can be spotty.

Equipment Programming

If you buy from an outside source, your provider will be able to program your equipment over the phone line. Ask them about it. You’ll have to decide whether you want a “tip” line or not. You can also choose not to have a customer signature line if you want to speed things up for small dollar transactions.

Further Information

The provider will walk you through the rest over the phone and in your welcome packet.

Review First Bill

Review your first month’s bill and question any unexpected charges.

Cards or No Cards?

For those who are deciding whether to accept cards, it’s really not if, it’s when. Even when you don’t know you’re losing business, you are. Once people know you don’t take cards, you’ll never know how many of those people aren’t coming to you anymore or are going to your competitor. Overall, you will not lose money on cards if you shop for a good rate. Sometimes you will sell a $.60 piece of candy on a card. Even on that transaction, you will not lose money, and probably someone who’s putting $.60 on a card doesn’t have any cash. Visa and MasterCard do not allow the retailer to set a minimum charge amount. It’s in their agreement.

Good luck! If you have questions, ask your fellow retailers. They’ll be glad to help.