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Accepting Payments

The two main ways to accept credit card payments online are:

• A merchant account
• A third-party merchant or aggregator account

A merchant account is set up via a bank or ISO, and is essentially an account controlled by the business, which enables it to process credit card payments. A third-party merchant takes credit card payments on behalf of the business, usually in exchange for certain fees or a percentage of the profits.

Choosing a Merchant Account or a Third-Party

Merchant accounts are subject to requirements that vary between countries and between banks and between ISO (Independent Sales Organization). Many banks charge a set-up fee in order to open the account, but their individual transaction fees will likely be lower than a third-party merchant's. Choosing an option will be dependent on the business's needs, predicted growth, and ability to sell enough products to cover all fees and associated costs. Due to the variation between companies, it would be best to get multiple quotes from different banks/ISO’s and different third-party merchants that offer website credit card processing.

Setting Up a Merchant Account

A web developer can help a business set up the credit card processing system on the business's website, but it isn't always necessary. Both merchant accounts and third-party merchants have customer service representatives and instructions to allow the site owner to set up the processing system on the site. With a lot of third-party merchants this is as simple as copying the embed code from the third-party site and placing it into the HTML of the business's website. More complex website credit card processing systems may require more time or expert help, but the result is a professional, streamlined way for customers to pay for their purchases online.

Things to Keep in Mind

All small businesses should be able to make informed decisions on what website credit card processing system works best for them. Keep in mind the following:

• Fees, including start-up fees and the cost of each transaction
• Length of time for approval when applying for a merchant account
• Length of time for setup on the site, especially in more complex systems
• Quick, efficient, and knowledgeable customer support for the business
• Length of contract and terms of cancellation
• Security and fraud protection
• Ease of use for both the business and customers
• Ability to generate reports
• Virtual terminals, shopping carts, and complete integration with e-commerce

1. Don’t rush into an account. The credit card processing industry has many moving parts and there are quite a few things to consider when opening an account. Give yourself enough time to do the research necessary to make a good decision. Selecting the right service provider can make the difference between a great experience and a miserable one. Make sure you understand how you intend on accepting credit cards now and in the future. There are many different account types depending on how you interact with your customers. Choosing the right account type ensures the very best rates are available to your business. Make sure you understand how interchange works. The majority of the fees paid to process credit cards come from the credit card interchange networks. Understanding how the interchange fees are calculated will help you negotiate the best deal on the account. Make sure you ask questions on items you don’t understand and develop a working relationship with a service provider before you sign up. Make sure you select a provider that has a dedicated account representative for you to work directly with.
2. Abide by the rules. The merchant service agreement outlines the rules and regulations for the use of the account. Make sure you understand the length and term of the contract. Make sure you understand what you have been approved to sell. During the application process you indicate the products and/or services you intend to sell. The rules for a merchant account stipulate that you are only allowed to accept credit card payments for the products/services approved on the application. Selling something else with the account can lead to the account being terminated and the business placed on the MATCH list.
3. Angry customers can hurt your business. Make sure that you respond to customer billing complaints immediately. Customers that can’t get their billing complaints resolved with the business will contact their credit card issuing bank or the credit card association and initiate a chargeback. Excessive chargebacks can also lead to the account being closed by the processor not to mention hefty fines for each occurrence. The best defense is a a good offence. Makes sure your customer service number is displayed on your customer’s credit card statement along with your business name. That way they will call you first. Make sure you answer their call and help resolve their issue.
4. Stay within your limits. Your merchant account will have certain limits established for the high ticket amount and total monthly volume that can be processed with the account. These limits are known in the industry as soft limits. There is always a little leniency for exceeding the limits on the account but it is always a good idea to know your limits and be proactive if you intend on exceeding them. For example if you know you are going to exceed your high ticket amount with a certain sale, call in for authorization first. This demonstrates good management and will make it much easier to increase your limit amounts in the future.

With so many companies offering merchant services it easy to find numerous providers that are interested in only one thing - taking your money. Accepting credit cards is important for a business to be successful, however selecting the right merchant service provider is as important, if not more.

When shopping for a merchant service provider it is advisable to give yourself ample time to review and understand the account before moving forward. Rushing to get the account set up is the fastest way to lock yourself into an account and contract that is unfavorable. Make sure to read the entire agreement and ask questions on the items you are unsure about.  A bad merchant service provider will be unwilling to spend the time necessary for you to feel comfortable with what you are signing up for.

Remember, you get what you pay for. The cheapest provider is usually a good indicator for a bad merchant service provider. No merchant service provider can attain wholesale pricing lower than another. That being the case, everything costs the same so the price charged should be about the same. If a provider is advertising rates significantly lower than the market rate they will make it up somewhere else. It’s simply a fact.  

A bad merchant service provider will be pushy with the sale and inevitably try to lease equipment or charge a huge mark up. Never, repeat never, lease processing equipment, you end up paying upwards of 10 times the actual cost of the equipment. Check prices for equipment on the internet so you know about what the equipment should cost. If you are being charged significantly more, you have an idea that the provider is not acting in your best interest.

A good provider takes the time to help you understand what you are signing up for. The rates for the service are clearly outlined and explained. A good provider is willing to negotiate the rates so that you are comfortable with the pricing.

The merchant services industry is extremely competitive and in order to stay in business a provider must offer good service and rates. Make sure to check the age of the company you are considering. If they have been around for 10 years or more, chance are they are doing something right.

A merchant cash advance is an easy, quick and cost effective way to get working capital for your business without the headache of a traditional loan. Qualification for a merchant cash advance is far less strenuous than traditional lending instruments. Cash is available in as little as 4 business days and is deposited directly into your business account.

How does it work?

A merchant cash advance allows your business to receive a lump sum payment based on your future credit card payments. You decide how much money you would like advanced. That money is then deposited into your account for use as you see fit. The cash advance is automatically paid back over a predetermined number of months. Over those months a specific percentage of each sale is used to pay for the advance. You have absolutely nothing to worry about as the advance is paid back automatically.

What are the qualification requirements?

Qualification for a merchant cash advance is easy and includes:

• A least a 500 credit score
• You are currently processing greater than $5,000 a month
• Your business primarily swipes credit cards and your average ticket is less than $600
• You perform at least 15 batches per month
• Your business has been operational for more than one year

If you would like additional information on a merchant cash advance, please provide us with your contact information and a representative will be in touch to discuss the program in detail.

When considering opening a merchant account it is important to understand that there are a few different merchant account types that your business can qualify for. The type of merchant account that is right for your business will depend on how you are accepting credit cards.

There are essentially two types of accounts that are offered, a swipe account or a keyed account. We will discuss both.

Swiped Account / Retail Account

This account type is set up for establishments that conduct business face to face and transact credit cards via swiping the credit card through a credit card terminal.  The approval criteria for a swiped merchant account states that 80% or more of your credit card transactions must be swiped through a terminal. The transaction fees associated with a swiped account are the lowest available. The rates are lower for this account type due to the fact that occurrences of fraud are typically lower when the customer has to present the credit card in person. More information on protecting your business from fraud.

Keyed Account (Internet Accounts, Mail Orders, Telephone Orders, Fax Orders)

Keyed merchant accounts are set up for establishments that do not conduct business face to face. This account type is set up for situations where the credit card information is keyed or typed into a terminal, virtual terminal or website. This type of account represents a higher degree of risk for the processing bank. This is due to the fact that the identity of the customer completing the order cannot be guaranteed.  The transactional rates for a keyed account will be slightly higher because of the increased risk of potential fraud. When accepting orders with keyed merchant account it is important to gather as much information as possible to verify the credit card information matches the information on file with the bank that issued the credit card. It is customary to gather the following at the very minimum:

• Credit Card Number
• Expiration Date
• Billing Zip Code
• CVV Code

If your business operates in an industry that has a greater degree of fraud attempts if might be advantageous to take advantage of additional fraud prevention tools. 

A merchant account is a line of credit extended to your business.  As such the underwriting criteria for approving a new merchant account includes the credit score of all applicants presented on the application. A bad credit score does not, automatically, mean the account will not be approved. Other criteria are also considered and include; the business’s industry, the method in which credit card transactions are processed (swiped vs. keyed in), the business’s financial strength and business history.

A retail business (traditional brick and mortar) will have an easier time securing a merchant account with bad credit then an internet business or home based business. Additionally, certain industries are considered high risk and it will be more difficult to secure an account with bad credit if your business is categorized in a high risk category.  

Another consideration for securing a merchant account with bad credit is to identify a merchant account processor that specializes in account approvals for low credit merchants. Another option is the addition of a co-signer on the account. The co-signer assumes some of the risk on the account and does not need to be a principal in the business.  

A seasonal merchant account is an account that is only open for certain months of the year. The seasonal merchant account is set up to functional only in the months that the business is operational each year. For example a golf course in Colorado may only be open from May to September. Given this scenario it is advantageous to have the merchant account suspend each year from October to April saving the business owner the fees associated with keeping the account open in the months where revenue is not being generated.

Other examples of seasonal businesses:

• Christmas Stores
• Sumer Youth Camps
• Alpine Ski Hills
• Fireworks Stores
• Ice Cream Shops
• Lawn Care and Landscaping
• Trade Shows

When setting up a seasonal merchant account you will indicate which months you prefer to have the account open and closed. During the months in which the account is closed your business will not incur any fees related to the account unless there are annual fees that are set to be billed in a month that the account is not active. Make sure to ask for full disclosure of all the fees involved with the account.

Some processors will also allow for the business to turn the account on and off numerous times each year. This is especially helpful for businesses that need a merchant account for trade shows that happen multiple times a year. 

When signing up for a merchant account it is important to understand the merchant account contract term. The term defines the length of time that the contract is enforceable. Knowing the contract term length and early termination fee will help you determine the commitment you are agreeing to.

There are typically 3 types of merchant account contract terms offered.

1. No Minimum Term
2. Specified Term
3. Auto Renew

No Minimum Term: This contract term is open ended without a termination fee. The merchant is free to terminate the contact at any time without penalty.

Specified Term: This contract term is for a specified period of time. The default contract term is usually 3 years. The contract term will be specified in the terms of agreement. If the merchant terminates before the specified period of time a termination fee will be assessed. If the merchant terminates after the contact term has expired there is no penalty assessed.

Auto Renew: This contract term is for a specified period of time and upon completion of the period the contract renews itself automatically for another full term. So if the merchant does not notify the processor of the intent to terminate at the end of the original term the contact will renew automatically and lock the merchant into the terms for another full period.

In conclusion it is important to understand the merchant account contract terms offered by the provider you are considering. Failing to address this item upfront can lead to a frustrating situation down the road.

Do you currently have an approved merchant account and looking to sell new products or services in your retail store or on your website? This post is intended to outline the rules imposed by your processor with regard to changing the products or services your business sells.

When your business originally applied for your merchant account you were required to give a description of the products and services you intended to sell. This product and service description was used by your processor to determine the SIC code for your business. The SIC code associated with your business determines the risk category used to underwrite and approve the account.

It is important to understand that the risk associated to the products and services you sell is significant to the processor that approved the account as they are ultimately responsible for any chargeback liability. Certain products represent less charge back risk, examples include; shipping, restaurants, screen printing, office supplies etc. Other products represent higher risks for chargebacks, examples include; electronics, travel, pharmaceuticals, auctions etc. It comes down to the fact that some products have a higher level of fraud associated to them as thieves attempt to acquire them.

In conclusion if you are looking to change or add new products and services to your business you will need to determine if the new offering resides in the same SIC code classification for the account that you were originally approved for. If they do you can usually sell and accept payment with your current account. If the new or changed products and services are outside of the SIC classification of your current account you will need to apply for a new account. If you are unsure, it is advisable to contact your processor. There can be serious consequences if you violate your merchant services agreement by selling unapproved products.