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Merchant Account Best Practices | Simple guidelines

Posted by Alex Neir on Thu, November 29, 2012 @ 02:02 PM
Merchant Account Best Practice
Whether you are looking to start your first merchant account or you have been accepting credit cards for years, this post is intended to give you some simple and effective credit card processing guidelines. Following these simple rules will ensure you don’t experience any unnecessary headaches with your merchant account.
  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.

Tags: Best Practices, Merchant Account Soft Limit, TMF, Merchant Account Education, Credit Card Processing

6 Steps in Applying for a Merchant Account

Posted by Alex Neir on Wed, January 18, 2012 @ 02:09 PM
Applying for a Merchant Account

Are you considering applying for a merchant account? If the answer is yes then this post is for you. I will explain the process and give you specific direction on how to secure the very best rates available.

When applying for a merchant account there is a specific order in which you should approach the process. Below are the 6 steps when applying for a merchant account:

  1. Review the different pricing option available and understand how your business is affected by each
  2. Review some questions to ask when shopping for a merchant account
  3. Shop at least 3 different providers
  4. What to expect with the merchant account application
  5. What will be required for merchant account support documents
  6. Generally, how long do it take to set up a merchant account

A detailed understanding of the different merchant account pricing structures will help you when speaking to merchant service providers. Some providers will pitch you a pricing model that is more advantageous for them and one that is not the best fit for your business. Additionally, it is important to know how your business transactions affect your costs with respect to frequency and size.

When shopping for a provider it is helpful to know what to ask. We have compiled a set of questions that will get you headed in the right direction.

Always shop at least 3 providers. This will allow you to get a feel for multiple providers and will strengthen your chances of finding a good fit for your business.

Once you decide on a provider the next step is the application. The typical application is quick and easy to fill out. Most providers will gather the requirements on the phone and are able to consult you on ambiguous questions. Important pieces to pay attention to are the merchant account soft limits. You will want to make sure you give your account enough room to grow as the business expamds.

Along with the application you will be required to provide support materials related to the applicant and business applying for the account. A short list of support materials can be found here.

The length of time it takes to get an account set up depends upon your type of business, industry, requested volume and financials. The process can take from 24 hours up to 2 weeks.

If you found this post to be helpful and would like to inquire into and account with Maxx Merchants please give us your contact information and a representative will be in touch shortly.

Tags: Merchant Account Soft Limit, Applying For a Merchant Account, Support Documentation, Merchant Account Pricing

6 Considerations for a Merchant Account Processing Limits Increase

Posted by Alex Neir on Tue, December 13, 2011 @ 01:21 PM
Merchant Account Processing Limits

The successful approval of any merchant account application is dependent upon the merchant account processing limits that are stipulated within the account application. The merchant account processing limits establish the boundaries for which the account must remain. Processing limits are defined with two account attributes.

  • The monthly processing volume
  • The high ticket or sale amount

Most businesses will estimate these attributes when establishing a merchant account to ensure room for business growth. However, if these attributes are exceeded the processor has the right to hold the excess funds until the overage is investigated and the processor is comfortable.

If your business’s monthly volume and high ticket amount have grown beyond that stated on your application, you can request a merchant account processing limits increase.

The acceptance of a limits increase is subjective so it is important to understand the factors considered for an increase.

  • Business Banking Balance
  • Business Credit Score
  • Business Processing History
  • Recurring Billing
  • Industry and Transaction Method
  • Reason for the Increase

Business Banking Balance – This is the amount of balance you are carrying in your business account from month to month. The underwriting department will want to see a strong balance in the account over the entire month. Not just the beginning and the end. This reassures the bank that if the increased limits result in chargebacks the business has funds available.

Business Credit Score – The credit score for the applicant(s) will always be investigated to ensure the applicant(s) are meeting their financial obligations.

Business Processing History – The business’s processing history will be reviewed to make sure the account has been managed correctly. The underwriting department will look to see if the account has exceeded the processing limits (soft limits) in the past. Chargebacks and refunds will also be looked at to determine how customers are behaving. Clean processing history is extremely important for an increase in processing limits to be approved.

Recurring Billing – Businesses that engage in recurring billing or automated re-billing are subject to higher levels of chargebacks and will undergo more stringent review for a processing limits increase.  

Industry and Transaction Method – Certain industries are considered more risky and will have tighter processing limits to protect the processor for chargeback liability. Additionally the transaction method will be considered when reviewing a processing limit increase. Retail, card present businesses will have an easier time than internet based businesses.

Reason for the Increase – The underwriting department will want and explanation as to why the business is asking for a processing limits increase. Has the business expanded product lines, delivery channels etc.

Business growth is the goal of every business. Excellent business management is the key to growing the limits established by your processor as a protection from liability. If you would like to request a processing limits increase, please contact our friendly staff at (800)917-8026.

Tags: Merchant Account Soft Limit, Merchant Account Processing Limits, Merchant Account Underwriting

Merchant Account Soft Limits – Explained

Posted by Alex Neir on Tue, June 21, 2011 @ 02:49 PM
Merchant Account Soft Limits

Merchant Account Soft Limits – Explained

When a business applies for a merchant account the application will ask for three financial figures that represent the credit card processing amounts requested by the business. These three figures are:

  • The average ticket or sale amount
  • The high ticket or sale amount
  • Monthly credit card sales volume

These figures help the credit card processor compile a risk profile for the business and ultimately drives weather the business is approved or not. A risk profile is considered based on the fact that the funds received from the end customer are deposited directly into the business bank account. The credit card processor assumes that the products or services purchased will be delivered. If they are not and the business disappears, the processor is responsible for refunding the customers money.

The sales figures requested on the merchant account application are weighted against the businesses financial strength to determine acceptance. If the business and owners are financially capable of supporting the requested amounts the application is approved.

Once approved these figures represent the soft limits for the account. The term “soft limit” is used because the account will allow these limits to be exceeded, however, the credit card processor reserves the right to hold funds that exceed the soft limits amounts on the account. Therefore it is important to understand your account limits and to stay within them.

What if you have to exceed your soft limits?

The best thing to do is be proactive. If you know you are going to exceed your high ticket amount or your monthly volume, call your processor ahead of time and explain the situation. By being proactive you are demonstrating good management of the account and most processors will work with you and will not hold your funds. 

Tags: Merchant Account Soft Limit, Why Is A Merchant Account A Line Of Credit, Risky Credit Card Transactions

A $50,000 transaction, should you run it?

Posted by Alex Neir on Tue, November 09, 2010 @ 12:57 PM
Risky Credit Card Transaction

When you signed up for your merchant account you specified your average transaction amount, your high transaction amount and your estimated monthly sales volume. These values were used during the underwriting phase of your account acceptance and represent the soft limits for your account. Most processors won’t have a problem if you exceed any one of these by a nominal amount. On the other hand if you exceed any one of them by an excessive amount you are raising a red flag with your processor.

Now should you run a $50,000 transaction with your merchant account? The question would be – did you specify a high ticket amount of $50,000 or more when you completed your application? Typically when a new merchant account is set up the business owner will estimate what they think the volume, average ticket and high ticket will be. It is always a good idea to exaggerate the values to approx double, ever triple the expected amount. This is a good practice to allow for expected growth of the business.

With regard to our $50,000 transaction, if your normal transaction size is $30,000 and your high ticket amount is $45,000 then you will likely have little problem with an amount slightly above at $50,000. Now if your average transaction is $35 and you high ticket amount is $500, then running a $50,000 transaction is a very bad idea. This transaction represents a great deal of risk for a business that is averaging $35 per transaction, both for the business and the processor.

Why is that a risk?

The risk of the transaction lies in the likelihood of fraud or a chargeback. This risk is substantial to your processor because if you commit fraud or have a large number of chargebacks with the inability to pay for them then the processor is stuck with the bill. Situations like these are handled differently with each processor. Some have automated systems that will flag a transaction if its outside the specified boundaries. Others have actual humans that review each account. Some processors allow for the business to exceed their limits temporarily while others will permanently shut down the account if the limits are exceeded. Regardless of the rules with your specific processor you are pretty much guaranteed to have your batch reviewed if it exceeded your specified monthly volume limit.

Most credit card processor’s risk departments have very specific operational guidelines they adhere to.  It is very important to know that they have complete control over the money that flows though the account they have underwritten. That being said, if your account breaks the rules the consequences can be severe. Some will shut down your account and never release any funds that are in excess of the guidelines approved for your account. Some will hold the funds for extended periods of time. Others won’t tell you the funds have been held and will wait for you to call in. Once your account or funds are transferred to the risk department within your processor it can be a very long, frustrating and cumbersome process to correct.

What should you do if you absolutely have to run a larger transaction?

I always suggest you be proactive. Call you processor and tell them what you would like to do. They may approve the transaction on the spot. They may want a signed invoice authorizing the charge from you customer. They may want to see recent bank account balances for the business. The point is that if you call ahead and seek approval first you are likely to avoid a great deal of headache later.

To sum it up:

Always try to get approved for the maximum amount possible when opening your account and secondly always ask before you attempt to exceed the approved limits on your account.

Tags: Merchant Account, Merchant Account Fraud, Merchant Account Soft Limit, Risky Credit Card Transactions