Choosing A Merchant Account Provider

Choosing A Merchant Account Provider

Should I Go Visit My Banker For My Merchant Account?

When you start looking for a Merchant Account, many people get input from their local banker. However, you should be aware that there are over 45,000 banks in the US and less than 1% are able to actually process credit card transactions themselves. Most contract with a third party to do it. Then the bank becomes a middleman passing on additional cost to the merchant. Here are some more facts & figures you need to know about banks:

Banks decline more Merchant Account applications for credit card processing than Merchant Account Providers. In addition, the application process is usually much less inten­sive with a full service Merchant Account Provider.

Banks are in the banking busi­ ness, Merchant Account Providers are in the credit and ATM/debit card processing business.

HOW CAN I TELL IF I WILL GET GOOD CUSTOMER SERVICE?

When you are entrusting the collection of your funds to other parties, you need to make sure you will be getting excellent service before and after the sale. You should be aware that many discount house Merchant Account Providers are hiring low salary or commission sales reps who know very little about banking or credit card processing. In many cases these inexperienced sales reps are not properly trained to understand your busi­ ness. You should beware of fast talking sales reps that don't take the time to learn about your business. Here are some of the things you can look for to rate the provider's service before and after the sale.

Banks outsource credit card process­ ing and focus on lending and deposits.

Banks often have conservative pricing with higher trans­ action rates & fees because the Merchant Account busi­ ness is an ancillary service. Merchant Account Providers have to offer competitive pricing because this is the only business they are in.

Banks are less likely to risk chargebacks and fraud. Because banks typically farm out their credit card busi­ ness if there is any additional maintenance like adminis­ trative costs from chargebacks, you are in greater danger of losing your Merchant Account. Merchant Account Providers are much better prepared to take on risk through loss prevention and chargeback departments.

Should you be interested in accepting credit cards over the internet you will find there is a greater likelihood most bankers will have no idea about shopping cart rates, secure gateways, and internet credit card process­ ing fees - particularly when something goes wrong. Do to the conservative nature of banks, they are many times unable to place high-risk merchants and/or start-up companies with merchant accounts. Full service Merchant Account Providers do this every day. Since this is their main business, they have the operations in place that cater to small & medium start-up companies who need Merchant Accounts, higher risk or not.

Service Before the Sale

When shopping for your Merchant Account Provider, you want to find a sales rep who will be your advocate through the sales process and beyond. This means answering all your questions and advising you during the application process. You should expect a prompt, accurate and professional response to your questions within 24 hours. If the sales rep is not asking you ques­ tions to learn about your business, he is less likely to be your advocate during the application process (this is typ­ ical of discount houses with low salary sales reps). The application should be fully prepared by the sales rep and delivered to you quickly, by either hand delivery, e-mail or fax. When you read the application there should be no surprises on start-up fees & recurring fees. After your application is submitted, the provider will do a background & credit check on your company. This could take a matter of hours or 1-2 days. During this time, you should be able to call for a status on your application approval. If you are not getting this type of service before the sale, this is not a good sign.

Service After the Sale

After you go live, you need the ability the process orders at any time. Your Merchant Account Provider must have the staffing and expertise to quickly help you with any of the following transaction roadblocks:

• Chargebacks
• Funds Not Transferred To Your Account
• Orders Put on Hold by the Processor's Bank
• Gateway Server Down

In addition to helping you with roadblocks, here are eight other things you should look for to assure good service after the sale:

8 Key Indicators for Good Service After the Sale

• 24x7 tech support, toll free, multi lingual
• 100% Money Back Guarantee on upfront costs if any
• Members in Good Standing with the Better Business Bureau.
• No High Pressure Sales Reps (not commis sion driven).
• Sale Rep takes the time to fully learn & understand your business.
• Free lifetime software upgrades for fraud control.
• Ability to call Sales Rep as your advocate if you are not satisfied with tech support.
• New storefront and internet marketing Ideas.

It's in your best interest to test the customer service response before you sign up with the Merchant Account Provider. Try calling tech support on a Saturday and see how quickly they respond. If you are not confident with their expertise and responsive­ ness before you sign-up, you need to keep on shop ping.

BE ON THE LOOKOUT FOR DECEPTIVE SALES PRACTICES

"There is no such thing as a free lunch". Remember hearing this phrase when you were growing up? While the internet has certainly changed the way we live and conduct our business, there are some rules of business that have not changed. One rule is to be cautious when the offer looks too good to be true." Another rule is that you should not engage with companies that use deceptive ractices to win your business. Here are some of the practices you need to watch out for: Start Your Own Merchant Account today for FREE!

As you gather information from Merchant Account Providers, you will likely find Providers luring you with "everything is free" type offers. If you call these Providers and start asking questions about what fees will appear on your monthly statements, you will quickly see that everything is NOT free. While starting a merchant account can be fairly quick & easy for you, the reliable Providers are expending significant resources to get you up and running. They must recover the costs for soft­ware engineering and hardware depreciation just like any other business. If they say start-up is free, they have to recover the costs elsewhere in higher discount rates and/or transaction fees. As an astute business owner you should know the old saying: "There is no such thing as a free lunch". The same applies here.

Suspiciously Low Discount Rates & Fees

Be careful about entering into a Merchant Agreement with a company based on rates & fees alone. Some Providers offer a really low discount rate to start and begin bumping it up a few months after you have enrolled in the program. Others make it up in surprise fees - ouch! Sometimes calling tech support is like play­ ing Russian Roulette - on first shift you get fully capa­ble support, and second shift it's total incompetence.

If the Provider's rates & fees are significantly lower than the others you should ask for references. Make sure to read the back of the Merchant Agreement before you sign and see if they have expensive exit penalties. If the provider's rates are really that low, why do they need an unfair exit penalty to retain customers? Did you know that every 0.1% difference in discount rate translates to only $1 per month for every $1,000 of orders processed? How much is reliable tech support worth to the success of your business? Again, ask for the customer serv­ ice number and call it a few times to see how long you get put on hold. Ask if that really low discount rate is guaranteed in writing and if so, for how long.

Remember - many Merchant Account Providers and Third Party Processors will offer a "great deal" on dis­ count rates and fees only to make it up later by raising your rates and fees a few months down the line. History proves these to be "bait and switch" tactics. Don't take the bait.

Using Smoke & Mirrors on the Merchant Account Application

Have you noticed that some merchants are easier to get approved for a Merchant Accounts than others? Merchants who sell risk-sensitive products such as mul­ tilevel marketing, pyramid schemes, sexually oriented materials, military firearms, and pyrotechnic devices are harder to get approved - especially when they are not honest up front. If you are in this type of business you may have some trouble getting approval the proper way. Yet, you know there are companies online selling sexu­ ally oriented products while accepting Visa, Mastercard and American Express. How are they able to do this?

There are Merchant Account Providers who accommo­date these types of businesses the right way and the wrong way. Remember that sales rep in the Introduction to this Guide that used different wording on the applica­ tion to hide what the company really did in order to get the Merchant Account Application approved more quickly. It gets worse. While this may help the merchant get started in the short term, this could have devastating effects in the long term. As soon as there is a problem with a chargeback or cancelled order the processing bank will find out and your merchant account will be closed. Your funds will be frozen until the bank believes it is safe to release them. Also, you may end up on the Visa Certified Terminated Merchants File (CTMF) which means you may never be approved for another Merchant Account. If your funds are frozen, you could lose your business. While smoke and mirrors work well for magicians, your sales rep should not be using this type of magic on your merchant account application. If he is, find a new sales rep and a reputable company. Your approval process may take a little longer but your business will not be destroyed. The risk of a "too quick" approval is too high.

How to Avoid Your Money Being Held By Your Non-Cash Transaction Processing Company?

What happens when you process credit cards for approval and then find out later the money never reached your bank account? This can be a very frustrat­ing experience and can be avoided with a little knowl­ edge. Many business owners don't realize that the credit card processing company is at considerable risk for credit card orders that are processed. Imagine this scenario... A fraudulent business owner (Mr. Crook) applies for a Merchant Account to accept credit cards and tells the salesperson that he sells "vitamins"over the phone, through the mail, or on the internet.

The Salesperson is very happy because it is a very easy sale. Mr. Crook takes orders for about six months and he even sells the vitamins at his cost. This results in getting a lot of orders. After six months Mr. Crook "pre­ tends" everyone who placed an order has re-ordered and keys in thousands of orders into his software or terminal; but Mr. Crook "forgets" to send the vitamins. People start calling Mr. Crook but Mr. Crook just tells them that the vitamins are on back order in order to buy himself some time to process more fake orders.

The credit card processing company deposits all the money for credit card orders taken in Mr. Crook's bank account 24 to 48 hours after each daily batch of orders. After Mr. Crook processes a few thousand orders over the next couple of weeks Mr. Crook empties his check­ ing account and leaves town; never to be seen again (until he calls the next eager Merchant Services Sales Representative with another company...) So what happens? All the honest customers who paid Mr. Crook start calling Mr. Crook's company only to find out the phone number has been disconnected. The next call most customers will make is to the bank that issued them the credit card that they used to place the order. The bank typically tells the customer that if they didn't get the vitamins then they will get a credit on their next credit card statement. The Bank then contacts the credit card processing company that processed the order to alert the company of a "dispute". The credit card processing company tries to contact Mr. Crook and gets the same disconnected phone number! Guess what? The Merchant Account Provider probably takes the hit and has to reimburse the thousands of customers who didn't get their vitamins. This can be devastating to the credit card processing company.

This is just one scenario but the exact same thing can happen even if Mr. Crook is honest and simply misman­ ages his business and declares bankruptcy as example.

These situations and others result in credit card process­ing companies always being on the lookout for the next Mr. Crook. One of the ways they do this is by approv­ing each Merchant with a monthly estimate of volume and an average order size or ticket (like a credit line) and assessing risk factors to the type of business, etc. It's easier for Mr. Crook to get a Merchant Account with a lower monthly volume approved and a low average ticket approved but Mr. Crook will try for the highest monthly volume that he can get approved and the highest average order size that he can get approved.

The credit card processing company looks for "spikes" in processing volume or a series of one or more large orders that are much higher then the average order size approved. Large average order size businesses are par­ ticularly scrutinized. When these "spikes" occur the bank of computer monitors at the Merchant Account Provicer alert the "Loss Prevention" department. Imagine, if you will, the overhead monitors in the movie "War Games" ;-).

When a suspected transaction(s) occurs the credit card processing company will typically want to check it out. They will want to protect themselves by possibly not sending the money to the business owner's bank account. Wouldn't you do the same thing if Mr. Crook was YOUR last experience? They may want to call the customer to make sure the customer placed a legitimate order. You, the Merchant, may be looked at as guilty until proven innocent.

So how do you, the business owner, prevent this from happening?

Make sure you know what the monthly volume and average order size are that the credit card company has approved you for and stay within these limits on a pro­ rate daily basis - particularly at first. Remember, the credit card processing company looks at this as sort of a credit line. Do NOT stack up a bunch of orders by accepting credit cards before you are approved for a Merchant Account and then key all the orders in the day you go live. This is exactly what Mr. Crook might do and you are asking for trouble. DO call the credit card processing company with large orders that are much higher then your average approved order size and tell them you would like to process the larger order. It prob­ably helps if you have a signed invoice. DO let the credit card processing company know about increases in busi­ ness do to your success, the season, or special promo­ tions, etc. Keep the credit card processing company informed. Again, this is especially true early in your Merchant Account relationship.

Make sure you are dealing with a competent Sales Representative who is properly advising you. That "cheap deal" may become very expensive later when you find out your account was incompetently set up. As a final caution, make sure you are doing business with a financially sound credit card processing company. Check them out. It's YOUR money that the credit card processing company has their fingers on. This is far more important then ordering office supplies as example from the cheapest source. It doesn't take very many botched orders or "lost money in the system" to make you quickly forget that "give away" up front pricing.

A Quick Guide to Third-Party Credit Card Processors

If you've ever looked into getting your own merchant account, you already know how expensive it can be. Application fees, setup fees, standard monthly fees, transaction fees... they all add up fast! It can be too much for a business that's just getting started.

There is an alternative. Third-party credit card processing companies handle your credit card transactions for you in return for a cut of your profits. Setup is typically either free, or there's a small, one-time fee.

Here's here it works: once you've applied and/or been approved and paid any applicable setup fees, you create ordering links for your products. These ordering links lead to the third-party processor's server, where they handle orders on your behalf. Credit cards and online checks are common ordering options provided by third-party processors. Some also offer a telephone ordering option.

• How much is the setup fee? Don't be put off if there is one; three of the four processors I use charge a setup fee, and they've been well worth the small cost.
• Transaction fees. After paying these fees, do you still make a reasonable profit? I've seen fees ranging from around 5% to about 30%, with the average somewhere in the middle.
• Are there additional fees for accepting online checks or telephone orders? Does the processor even offer these as options?
• Settlement fees. Does the company charge to cut you a check each pay period, or to wire transfer your funds to you?
• How much is the reserve? A 'reserve' is the amount held back from each pay check as a "slush fund" against future refunds, returns, or chargebacks. What percentage do they hold as a reserve, and for how long? It's commonly 10%, 10%, held for 6 months before being released back to you.
• Pay frequency. Most pay either every two weeks, or once a month.
• Reliability. Talk to others who have used the service to see if they've had any problems. If your order processor is 'down', your customers can't buy! * Restrictions and limitations. For example, is there a minimum monthly sales quota you must reach? Is there a maximum product price you can set? Does the company restrict what the type of content you can sell? Do they handle only tangible or intangible products?
• Customer service. Does the company respond promptly and helpfully when you contact them?
• 'Extras'. For example, are there reporting or tracking capabilities? Free use of a shopping cart?

• Free Merchant Source http://freemerchantsource.com
• Clickbank, http://clickbank.com/
• GloBill, http://globill.com/
• Digibuy, http://www.digibuy.com/
• Revecom, http://revecom.com/
• iBill, http://ibill.com/
• 2Checkout.com, http://2checkout.com/
• Verotel, http://verotel.com/
• CCNow, http://ccnow.com/

PayPal Checkout Process Makes Online Shopping Easier

Using PayPal as a gateway for accepting online payments has just become much more attractive.

PayPal, owned by eBay, has always been considered one of the best, most secure choices of payment for auctions, whether by check or credit card. But one of the biggest drawbacks to it has been the restriction that the buyer also had to have a PayPal account in order make that payment.

Not anymore! PayPal has optimized the checkout experience for buyers by launching an exciting new improvement to Website Payments. With PayPal's improved Website Payments checkout, purchasing online by many types of payment can be easily made... Once a customer has decided to make a purchase, they are walked through four easy steps:

1.Shipping information - Customers enter name and shipping address. 2.Billing information - Customers enter credit card information, email address and phone number. They also have the option to send a message to you. 3.Review of payment information - Customers review what theyХve entered to make sure itХs correct. From this point, they can either edit the information or complete checkout. 4.Save customer information with PayPal (optional) - To shop more quickly and easily in the future, customers can save their personal information theyХve already entered with PayPal All they need to do is choose a confidential password and create answers to a few security questions.

To toggle off this new feature, the PayPal account holder can simply log in, go to their Profile subtab, click on Website Payment Preferences in the Selling Preferences column, and check or uncheck the yes/no box under PayPal Account Optional.

Currently the account-signup-optional feature is available to US sellers and their customers, for Buy Now, Donation, and Shopping Cart transactions. Currently it does not apply to eBay transactions, Subscriptions, or Send Money / Request Money transaction -- however these are being considered to be added in the near future as well.

According to sources at PayPal, they are also looking into extending this availability to non-US merchants in the near future. However, there is no confirmed release date.

NOTE: Information provided to the seller is the same as before, based on the user's billing & shipping addresses. Depending on the seller's choice of payment settings, they can choose whether to ship to addresses different from that on the credit card or not.

The "PayPal Account Optional" feature can be toggled on or off from a PayPal account holder's profile setting, under the "Selling Preferences" / "Website Payment Preferences" area at the bottom of the page, below the "Auto Return" setting.

For small business out there looking for an online credit card acceptance solution, this must certainly put Paypal at the top of a very short list. With a Standard rate of 2.9% and $0.30 per transactiuon, its not the least expensive per transaction fee out there. But with no monthly statement fees, no upfront gateway fees, no monthly minimum $$ requirements, it presents a very attractive way to get into the online arena at minimal cost. That coupled with the relatively easy acceptance criteria for establishing an account, easy to manage reporting and transfer options as well as the various options offered for building an ecommerce shopping cart, this appears to fire a solid shot across the bow of established merchant account vendors such as WorldPay, Linkpoint (CSI), and 2Checkout.

One final item that almost slipped our attention...but makes PayPal an extremely attractive option to even the most experienced online merchant. Chargebacks are limited to 30 days rather than the typical 6 months found with other processors. And that could be a powerful enticement on its own!