Demystifying Merchant Accounts
Accepting
credit card payment online such as Visa and MasterCard is
essential to Internet business. This article provides tips
for applying merchant account.
Accepting credit card payments for goods and services has
become
a huge business. Accepting Visa and MasterCard as well American
Express and Discover can add hundreds if not thousands of
dollars to your sales figures each month. The problem then
becomes which company do you apply with and how much does
it
cost?
Because it is a huge business more and more banks and merchant
service firms are competing for your business. Here are some
things you need to know about merchant services.
A) Every bank and merchant
account service provider charges a monthly fee. Some state
it is for your monthly statement, some just say it is an additional
fee for the account. Either way, it ranges from $5.00 to $25
per month. You will get separate statements for Visa/MasterCard
(from your merchant provider), American Express (from AmEx
directly) and Discover (from Discover directly).
B) There is a discount fee. A discount fee is the percent
of the
transaction the merchant provider will take for doing business
with them. Right now it ranges from 2% to 3%. Visa/MasterCard
have one discount fee, American Express another and Discover
yet
another. (That’s the reason for having three separate
statements). American Express and Discover tend to have higher
discount fees than Visa/MasterCard.
C) There is also a per transaction fee. This ranges from
$0.15
to $0.25 per transaction. Again, American Express and Discover
will have different transaction rates.
Be careful and read the small print before signing the
application. Here are some questions to ask that have a major
impact on your cash flow.
1) How long from the date of the charge until the money is
deposited into your checking account? Some are as quick as
24
hours (that’s business hours). Some hold funds for as much
as 14
days before going into your checking account.
2) At what amount will the order(s) be held for verification?
Some hold funds right away until they get 10-20 batches
verified. Some hold anything over a set amount. I have been
told
that only orders over $1000 will be held. I have also been
told
that nothing will be released until 10 batches, regardless
of
size, have been verified. One merchant provider held more
than
$10,000 until 12 batches were verified.
Important Note: You must keep paper documentation for each
order
as well as tracking numbers and/or delivery receipts, if you
ship merchandise. This is needed to verify orders for your
provider as well as to settle disputes down the road.
3) For many this is not an issue but for others it's huge.
What
is the maximum amount (in dollars) that you can process each
month? The standard is $20,000 to $25,000. Anything over that
and the merchant provider will shut down your account. This
risk
is too high for them especially for unproven, unsecured accounts.
4) They have the option of shutting down your credit card
processing. What is their criteria? What would cause them
to
shut down your account? Do they have to give you notice? Common
sense says they must inform you before taking such as drastic
step but I have seen it happen. Accounts have been closed
and
bank accounts frozen without a phone call, email or fax.
5) How are charge backs handled and what is the fee for a
charge
back? Do you get the chance to state your case or is the money
immediately refunded to the customer without your approval?
You
will probably find that American Express and Discover will
let
you dispute the charge back and work with the customer.
Visa/MasterCard don't always give you the option.
6) Who is your point of contact? Get a name so you know who
to
go to with questions and issues after your application is
approved. The person that processes your application through
is
not the person that will have answers for you later on.
7) If you are using merchant services in conjunction with
your
web site, does the merchant work with the back-end of your
site?
Do you have to manually enter orders? For example, Yahoo!Stores
only works with First Data linked merchant services. Innovative
Merchant Services works with gateways such as Verisign and
Authorize.net. QuickBooks and Chase Manhattan Merchant Services
require manual entry but are processed online.
As far as merchant service providers go, I like Card
Services International. The company has good rates and
have ecommerce as well as offline(traditional) processing
options. In my opinion, it is better to go with a larger,
well- established credit card merchant. Smaller firms have
a tendency to have less customer service, more restrictions
and less input from you.
Choose your merchant service provider wisely. Credit processing
can have a huge impact on your bottom line.
============================
Suzette Flemming is the CEO / CFO of Flemming Business Services.
Providing financial direction to businesses since 1994. Learn
how to save money and increase your bottom line by subscribing
to our free newsletter ~ Make the Most of Your Money at www.FlemmingBusinessServices.com
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