Helpful Articles - Vacation Rental Management Resource Center

The Guide to Accepting Credit Cards for Vacation Rental Owners - Part 4

Copyright 2008 VacationRentalDesk.com

Part 4: The Costs of Accepting Credit Cards

This is the fourth part of a five part series providing helpful information to vacation rental owners about accepting credit cards. In this part we'll examine the costs involved in accepting credit cards, and the caveats uninformed owners can be faced with and how to avoid them.

Now that we have an understanding of the benefits of accepting credit cards and what's required to start, we're going to take a look at the costs of doing business with credit cards, and how to avoid lengthy commitments and hidden costs.

Anytime a credit card is charged, whether at a retail store, a gas station, or at the grocery store, a per-transaction fee and a discount fee apply to the merchant. Here are a few definitions of the fees that are incurred by the merchant:

• Per-transaction fee - A per-transaction fee is a small fee charged for every transaction you process. Common transaction fees range from $0.35 to $0.75 cents depending on the volume of cards charged per month.
• Discount Rate - (Also called the main processing fee) A discount rate is a percentage of the order amount that credit card companies charge. There are two different types of transaction types, and each has a different discount rate. For Card-Not-Present (CNP) transactions (where the customer doesn't physically swipe their card and sign a sales receipt), the discount rate on average is 2.5% to 2.8% for Visa/MasterCard, and a fixed 3.8% for American Express. Card-Present (CP) transactions usually have a discount rate of one percent lower. The reason CP transactions have a lower discount rate is because credit card companies believe consumer fraud to be more difficult. Vacation rentals fall into the higher CNP category since you take the customers card over the Internet or over the phone (this is true even if you're keying in a customer's credit card through a physical terminal you've purchased and installed).

In addition to these regular fees, it's important that you be aware of other monthly and hidden costs frequently charged by renter card acceptance programs and generic merchant programs. These costs include:

• Monthly Statement fee – A monthly fee charged to your merchant account of $10 to $20 for mailing you a statement of your transaction history for the month. This fee is charged even if you receive your statement by email. Sometimes also called a "merchant monthly fee."
• Gateway fee – A monthly fee of $10 to $15 which is required for all merchant accounts. Sometimes the Statement fee and gateway fee are combined behind the scenes as one large monthly fee.
• Setup Fee – This fee, usually $99 to $299, is charged for the overhead involved in screening an applicant, performing a credit check, and getting the approval of the provider's underwriting department. If a merchant account provider isn't charging a setup fee, beware - they're making up the cost somewhere else in the fine print.
• Chargeback fee – This fee, usually $25, is charged to your account when a customer files a complaint to get their money back due to fraudulent activity or services not received. This charge is only applied after the request is investigated by the credit card company and the merchant is declared at fault.
• Equipment costs – On average $150 to $300 and up. This cost is for optionally installing a physical credit card terminal in your home or business and plugging it into a telephone line.
• Virtual terminal fee – Many merchants and card programs charge you a monthly fee if you want to key in transactions over the Internet because they lose money if you don't purchase a physical terminal to install in your home or business.

In addition to these fees, you'll also need to pay extremely careful attention to the following charges and conditions that uninformed vacation owners often fall victim of:

• Monthly minimum – This is a mandatory fee of $20 or more charged to your account every month whether or not you perform any credit card transactions. It is our advice that if a merchant account provider charges a minimum monthly fee, look elsewhere since this can really add up and become burdensome.
• Contract lengths – If you look at the fine print of most merchant account applications, you'll find contract lengths for a period of 24 to 36 months. Should you wish to cancel your account before your contract expires, you're going to be billed the full remainder due for the entire length of your contract.
• Annual fees – Many merchant account providers charge an annual fee of at least $95. This is nothing more than a clever service fee companies hope you don't notice, and you receive no direct benefit from it.

I recommend you avoid all card programs that charge monthly minimums, term contracts, and annual fees. You'll also want to avoid programs that charge virtual terminal fees and higher than normal (e.g. $25) chargeback fees.

There's also no need for you to purchase any equipment and install an extra phone line in your home or small business. Only retail merchants need physical credit card terminals so that customers can swipe a card. You should be able to use a virtual terminal with your account for free.

Finally, what about customer support? If you ever have a question about a transaction, your bill, how to perform a chargeback, credit, or debit, or need help with pulling a report, you'll want to make sure you can talk to a live, helpful, and professional customer support person.

Many credit card acceptance programs will offer lower prices by providing inadequate support or no support at all. Customer service is often shipped overseas to low paid workers who speak poor English and attempt to solve your problem by comparing your question with a training manual sitting in front of them.

I hope I haven't scared you away by disclosing the truths about credit card acceptance programs offered by most merchant account providers. With this information in hand, you can select a reputable company that will make your credit card experience positive and profitable.

In our next and final article, we'll look at our own credit card program at Reservier, and show you how we've made accepting credit cards inexpensive and easy for vacation rental owners.

We'll also introduce Vacation Rental Desk™ and explain how it processes credit cards for you.

Continue to Part 5

Part 5: How Reservier Makes Accepting Credit Cards Simple