Accepting credit cards can be a very intimidating option to consider as a sole practitioner or small-firm attorney – if you deal with collecting retainers from your clients…
The word “merchant service” has developed an almost ominous connotation among solo professionals – and for good reason. Most people associate the phrase with ludicrous fees, minimum transaction volumes, equipment rentals and restrictive contracts. And all too often, that notion is entirely justified. [ See Lawyer Billing Tips ]
In fact, several professionals simply choose to forget about accepting credit cards altogether – because it’s just “one less hassle” to deal with. Unfortunately, this can actually cost them quite a bit of business, whether they realize it or not. It’s been continually proven that providing your customers the option of paying with credit will increase sales (in this case, client volume) in practically every industry.
Furthermore, the main advantage for an attorney to accept credit cards wouldn’t so much be an increase in client volume as it would eliminate waiting for checks in the mail – not to mention having someone make a bank run to get them deposited. And credit card payments don’t “bounce” either!
The truth is that while there actually are some very affordable (and flexible) services available to solo professionals, they’re also very few and far between. And in most cases, they’re not easy to recognize.
So let’s explore some of the terms and terminology of the merchant industry so as to “de-mystify” the process of choosing a merchant company that will effectively suit your practice…
* Statement Fees: Most merchant account providers will charge you to simply receive your billing statement. This normally costs $10.00 per month. This is, for the most part, a “pointless” fee for the purpose of generating additional revenue for the merchant company as it much more than covers the cost of distributing a statement – although, not all companies have a statement fee.
* Monthly Minimums: Several programs include a “minimum”, which is not a minimum amount of sales volume, but rather it’s a minimum charge in regards to transaction fees. Normally, this is $25.00 per month. This does not mean that a $25.00 sale will waive the minimum.
* Transaction Fees: This is a flat-fee per transaction through your merchant account. This will typically be around $0.25 per transaction – although different credit cards will themselves charge a transaction fee as well, such as American Express and Discover.
* The Annual Fee: The majority of merchant services will employ an annual fee, ranging from $45.00 to $95.00. Again, this is simply a premium for using the service.
* Program Fees: Also called the “monthly fee”, this is simply a monthly premium ranging from $5.00 to $25.00 per month to accept credit cards via the merchant service in question.
* Discount Rates: Also known as the “flat rate”, this is a percentage of every sale that is automatically commissioned to the merchant service, and split between them and their processor (if they’re a third party). This will range from 1.95% to 5.95%, depending on the nature of the service.
* The Cancellation Fee: The majority of merchant services do utilize a “minimum term of duration” within their account contract. To cancel the contract before it’s term has expired will cost anywhere from $95.00 to $250.00, sometimes more.
* Equipment Lease or Purchase: In general, you’re required to either lease or buy the (expensive) equipment needed to process credit card “swipes”. Leasing equipment can range from $29.00 to $79.00 per month, with an average term of 36 – 48 months. These leases cannot be cancelled. In addition, you will be paying the relevant state tax on those payments – and to top it off, most companies will charge an extra $3.00 per month or so for a “Loss and Destruction” waiver. At the end of the lease, you must either return the equipment in good condition, or you must purchase the equipment for at its current market value. The purchase price will be something like 15% of the aggregate lease payments (for a 36-month term).
As you can clearly see, all of this can add up to a substantial amount of money – and if you do default on the equipment lease, it will show up on your credit report.
Accepting credit cards doesn’t seem too exciting at this point, does it?
However, as I had mentioned previously, there are some affordable options within the merchant industry that actually cater directly to solo professionals and part-time business owners.
For example, did you know that you can accept credit cards – without any equipment at all – by simply using your cell phone (or blackberry)?
Not only is this type of system totally mobile, most of these services are uniquely affordable. One in particular, “Accept by Phone”, costs only $5.00 a month with a discount rate of 3.95% on each sale. Such services are able to bypass all the other fees because of the way that transactions are processed – and the automated call-in system literally allows the vendor to authorize and process the payment in real time within a matter of seconds.
Because this type of service is “equipment free”, there is also no cancellation fee should you decide to cancel an account.
Now, even if you would be processing most of your payments at the office – and if you needed equipment – there are also a variety of cost-effective services that suit that need as well. Just make sure that you take a very close look at the terms and conditions of service in question.
Remember that the most crucial element of any merchant service is the term (duration) of the contract. They may be offering free applications, low fees and so on, but make sure that it’s not because they plan on locking you into a two-year contract.
Unfortunately, this is how most merchant companies make their money.
However, you’re no longer at the mercy of the merchant industry, because you’ve just taken a “behind the scenes” look at how the whole system really works. You can now investigate accepting credit cards from your clients with confidence, knowing that it truly is possible to make life easier – not harder – by allowing your clients to pay with credit.
It’s simply a matter of finding a service that caters directly to your needs as an attorney.