When Rates Are ‘Too Good’ to Be True And How to Tell
August 26, 2010 by Admin · Comments Off
My mother used to tell me all the time, if it looks “too good to be true” than it probably is. This advice is applicable to all walks of life and especially pertinent to Merchant Service Providers. We all have the inner critic that screams inside us when we know we see something good, so good that it can’t be real….We want to believe the deal, we want good pricing at affordable realistic costs but that’s the key…it must be realistic. One has to educate themselves with regards to basic service costs in order to properly determine what is a good deal, and what is a too good to be true deal!
Understand The “Basics” Of Credit Card Processing
The most important aspect of any Merchant Service Provider’s contract that one must understand is that Visa and Master card make their money first. There are real minimum’s that they have to meet in order to be able to afford to process for customers and merchants. These minimums are known in the industry as Interchange.
No merchant provider can go below interchange and if they do, they are making up the monies elsewhere in their service contract. And this is where it becomes dangerously costly for the merchant. A good solid rate should lie (today) anywhere between 1.90 and 2+ percent. Interchange is always changing, subject to change without notice and for ever flexing to incorporate different types of cards customer’s use. To see a low rate as 1.30% (which is out there) simply means that the Provider is going below interchange to snag customers, and making it up in additional fee’s and costs that will end up costing the merchant much more than they would have paid accepting a modest and truthful rate.
Don’t Get Caught in the “Lost Litre” Marketing Scam
A basic rule of thumb to avoid getting stuck paying much higher qualifying fee’s, is to know that if it’s too low, it’s not a real rate. It is what sales refer to as a “lost litre”. The merchant services provider will lead customers in with low qualified rates and double or triple what should be the Non Qualified because they can, when merchants don’t know any better, they will be fished in with the lost leader. So on this note, be sure to scrutinize those too good to be true rates against a company who offers a flat rate for all transactions.
Just as Visa and Master Card cover their expenses in their price, so do the companies offering Merchant Services. Every business has to pay the basics in order to be able to operate. One needs to pay rent, heat, employee’s ect, to obtain enough profit to run a business, you will see additional fee’s on contracts. These fees just further prove that the company is valid. When there is no fee for service, you probably won’t get any. This is a realistic assumption. Allot of companies now a days are operating only online, therefore cutting any over head expenses…..expenses like customer service, real time assistance, detailed billing and warranties on their equipment. Just like Visa and Master Card, there will be fees implemented to the merchant to ensure the provider is able to stay in business as well.
Getting Low Merchant Discount Rates Is All in The Education
Like any shopping situation, bargaining has to be the result of a well educated rebuttal, companies cannot process for free, just like Visa and Master Card will not. So when you are looking for services, or to re-vamp your current pricing, be sure to educate yourself on real costs, from real business’ so that you can tell from a mile away going forward, what kind of offers are just too good to be true.
Why Do Merchant Account Companies Charge Set-Up Fees?
August 25, 2010 by Admin · Comments Off
“Why do merchant account companies charge set up fee’s and why to watch out for companies that do not.”
Upon signing a merchant services contract, there may be additional fee’s. There are many good reasons as to why these fees exist and although it may seem bothersome to have to pay them, they are incepted and initiated with good reason.
Firstly one needs to realize that all merchant services providers, weather they are ISO’s (Independent Sales Organizations) or Member Banks, are always subject to Interchange.
Interchange can easily be explained as the “cost of doing business” for Visa and Master card. So right off the bat, providers are dealing with a minimum fee just to be able to offer the services. In addition to the basic interchange, providers do need to profit as well, so they can never offer just interchange pricing, anything in addition to the basic rate is considered a fee, however it is essential to being able to provide the service.
Any contract that has a UN realistic rate is a scam; you can look forward to all kinds of additional hidden rate structures, as no one provider can afford to charge just interchange. It is important to remember and consider this when reviewing a very low qualified rate.
Other fees may include processing, or Authorization Fee’s. Just like Interchange, there is a real cost to the banks themselves who control the deposit’s. Knowing that there is an authorization fee again, however bothersome, basically solidifies the fact that one is dealing with the bank directly and therefore offering a sense of security for the merchant. When there are no authorization or push fees, they are making up for this cost elsewhere, so again, watch very carefully where the profit is being collected.
Statements and Monthly Service fee’s are a very common aspect of any contract. These fees are generally paying for the service a merchant receives. There is real cost involved in processing your transactions, sending out statements and so forth. When these fees are evident on the applications, one can take comfort in the fact that they will receive customer service, statements and all other services associated with processing for a merchant.
The real cost associated with processing for a merchant have to be considered. To be faced with an application that has no basic fee’s, and very very low rates (if they offer rates at all) is something to be very cautious of. As we have clarified, these fee’s are generally associated with the costs that trickle down from a collective of companies coming together to offer you this service.
If there are no fees, then there is no service and these are the companies to watch for. Always remember that as a customer, you are entitled to information and negotiation so try to negotiate the fee’s that mean the most to your processing needs. One must realize that fee’s originate from gaining service, everything costs money, when things don’t have any monetary value, and they generally lack established value as well!
5 Dirty Little Secrets About Merchant Account Services (ISO’s) From a Guy Who Has Worked At A Half Dozen Merchant Account Companies
August 20, 2010 by Admin · Comments Off
First, the good news: They are not all crooked, in fact a good portion of ISO’s are honest hard working men and women who have no intention of squeezing every penny out of you. Unfortunately, those that want to help you are outnumbered by those who are less than honest.
What you are about to read is a very good simple guideline to follow if you are having doubts about an ISO selling Merchant Accounts. Read carefully and if the person you are presently dealing with is “selling” what is written below, say ‘thank-you but I am not interested’.
1. The worst and most popular sales con at the moment has to do with Visa and Master Card rates so let me explain the following so that you fully understand why the sales representative you are dealing with could be deceiving you.
Visa and MC International charge what is known as an Interchange discount rate of 1.59. This can go up in the future but at the moment it remains at this rate. Any Visa or MC acquirer such as Moneris, Global Payments or Elavon will add an “Assessment” rate of 0.06 basis points to the 1.59 and this is considered their profit rate. In other words, the starting point for any sales rep cannot be lower than 1.65 unless you, the merchant is a gas station chain or a very high end grocery store such as Real Canadian Superstore. To offer anything lower means that the ISO will be losing money on every transaction. (Please note this rate is for Qualified transactions, the minimum rate for Unqualified is 2.04)
So, here is the con. The Merchant Account Services company will offer you ridiculous rates of 1.35 percent for Qualified transactions. These are transactions from normal credit cards that are swiped on a POS terminal. Sounds great right…but here is where it gets nasty. The ISO will offer these amazing rates but then charge you 2.75 percent as a discount rate for Unqualified cards. These are transactions that are keyed in manually, or are foreign credit cards, corporate cards, credit cards with air miles or some bonus point cards. Sixty percent of all credit card transactions fall under the heading of unqualified. So although you think you are saving, in reality you are not. The other shady trick is that the ISO will offer 1.35 percent and then turn around and raise 40 basis points three months later.
2. If you are leasing a regular IP or Dial stand alone POS terminal you should never pay more than fifty dollars a month for a 48 or 60 month term. This is dependent on the buy rate offered by specific manufacturers.
3. If an ISO charges you fees that are hidden in the back of a contract, then seriously consider someone else. The normal fees from any reputable ISO are as follows: Statement; Minimum Monthly on Visa/MC; normal transaction haulage fees; Set Up fee not exceeding one hundred dollars (for stand- alone terminals). This pays for processor administration costs.
If you ever see anything like Yearly Membership Fee then disregard this sales rep…immediately!
4. If they do not have a Help Desk then who will be helping you when you have a problem?
5. Every merchant acquirer and ISO has a cancellation fee, it is unavoidable but there are many who have excessive fees. In fact, I know of one that charges five thousand dollars. Find out the cancellation fees in advance and if they are more than three hundred dollars do not sign. If an ISO charges enormous cancellation fees there has to be a valid reason why they do and it always means their customer service and/or brand is awful.
Remember that there are good people in this business. The trick is to find them and to avoid those that rely on trickery.
What the Difference is Between an ISO and Bank Related Merchant Account?
August 16, 2010 by Admin · Comments Off
When considering where to obtain merchant services, there is no shortage of providers to choose from now a days that’s for sure! There is no doubt that processing has become a lucrative business. Over time, the service has been de-regulated, so merchant’s have much more choice as to who they want their provider to be. There are two major conglomerates to choose from. One can choose to have their Bank (member Bank – which means they are certified to process Visa and MC) process their transactions, or an ISO (Independent Sales Organization). Iso’s were developed after the de-regulation of merchant services.
There are some major differences between having an ISO process your transactions in comparison to the bank.
Direct Processing is a little bit faster from a bank hosted account, only because they have a direct link to the merchant’s banking info, where as with an ISO, the timing for deposits maybe anywhere from 24-48 hours after settlement. This difference exists because the branch would have a direct link to the deposit account, where the Iso’s deposit has to be cleared by Iso, then the member bank.
The Member Banks will also be more accepting of high risk merchant processing because of this link to the merchant’s account. Often times a merchant will have a business account with their bank, as well as other savings and credit accounts. Because of this “direct access” the branch has immediate security in the form of the entire merchant’s investments act to draw upon should there be any faulty transactions.
This high risk processing has advantages with Iso’s that the member banks cannot compete with at the same time….often times Iso’s are eager to obtain business, and, with the appropriated security in place, maybe more accepting of high risk accounts.
Service levels are another major difference. Banks are not as fast to provide comfortable “one stop” customer service in the same way that an Iso may be. Again Iso’s are more customer driven and as a result often provide better, faster more specific and personal customer service. As one may deduce, part of this improved service has allot to do with Hours of Service, Iso’s often have their own customer service and help desks working around the clock, where as a bank has very pre determined hours of operation, which are regulated and often not convenient for when a merchant may require additional services.
Pricing is a standard issue for any merchant seeking out services. This is where we see another major difference, in that, the Iso’s will compete and drive their prices down in order to obtain one’s business, the member banks are less competitive and often do not respond to competitive pricing quotes.
The best aspect of all of the differences mentioned here is that with the existence of both Bank’s and Iso’s being able to process merchant services, it offers a competitive edge to merchants. Just like any monopoly the more players on the board, the more fierce the competition which, in relation to merchant services, leads to the potential for better more competitive pricing and increase in the quality of service for merchants.
7 Questions a merchant should ask when shopping for better merchant account rates.
August 11, 2010 by Admin · Comments Off
Merchant Services Terms and Services, are never non negotiable. The providers want their customers to be happy and processing! There are many companies out there, member bank’s and Iso’s who want to process for merchants. It is best to be well informed, and know what you are looking for before shopping around for services. Here are a few key points one may want to look at or ask for when shopping around for better merchant account rates.
Firstly, one must realize it is not just the rate you are paying for, and also those rates are subject to industry minimums (interchange). So, when the rate battle is lost before it’s fought, there are other aspects of the service where one could save themselves some money before negotiating the final contract.
- Mid and Non Qualified transactions. The credit card companies charge the merchants different rates for different types of cards customer’s use. Naturally, the credit card companies issue more of these cards, so it is likely that the mid and non qualified rates is what one would be paying more often, so it’s on these specific rate fee’s where one is advised to bargain.
- Authorization and Processing fee’s. These fee’s are a reality. Every service provider will have either an electronic funds transfer fee, or push fund, essentially a charge for issuing transactions on top of the rate. This can be negotiated as it’s often chalked up as 100% profit for the provider. Asking for “zero” is never functional, but asking for something less than what is offered, is acceptable and this is one of the fee’s they can alter to gain your business.
- Statement Fee’s. Again, every provider charges something, even if it’s lumped into a Monthly Service Fee. And again, this is one of the 100% profit margins for the provider so, just as in our prior example, this is a suggested point of negotiation to bring down your monthly costs for merchant services.
- Monthly minimums. These are usually 10-20 dollars a month, and can be negotiated. It is less likely that they will able to do nothing, but 10.00 is an industry standard, one could draw upon any provider to cut the minimum down, but not out altogether, again, asking for nothing will get you nothing~!
- Rental/Additional Hardware fee’s. As a merchant, you should be either purchasing the terminal one time out right, or renting/leasing the machine depending on what is comfortable. In the instance of renting/leasing, there is room to request decrease in the price offered. When a terminal is purchased, be clear that there is no Imprinter fee’s or any other costs associated with monthly processing.
- Guarantee of Terms. The discount does not always lie in pricing alone. Be sure to negotiate any terms of service you are uncomfortable with. One can often get decreases in cancellation fee’s, de activation fee’s these do not save money up front, but rather provide a security blanket of sorts, knowing that no unexpected fee’s can creep up later.
- Early Termination Fee’s. No provider wants to get into an agreement, with the merchant asking about termination fee’s. The reality is, a merchant’s rates are approved under the assumption that the provider will gather a good 4-5 years worth of business, to make the rates justifiable. These terms are set by Visa and Mc and can still be negotiated. Again, like number 6, it is not money saved up front but rather security in knowing that they will not likely occur, and if they do it is affordable for you.
It is always best to address these issues in a calm tone, if you are dissatisfied with the offers, seek out another provider; there are enough that one of them will meet your needs!
What are the different Mobile Credit Card Solutions?
August 10, 2010 by Admin · Comments Off
There are allot of different businesses out there. As the economy grows and business’ flourish, different ways of doing business are happening as well. We are a technologically advanced society and everything we do in our lives is more and more dependant on technology. The Merchant Services industry is no different, and has rapidly conformed to the changing needs of their potential merchants, being sure to offer processing in many different format’s as to keep up the standards. The biggest breakthrough has been the inception of Mobile business, and to follow suit, merchant processing is as well, available in what can be considered a mobile format.
There are five major solutions to mobile processing:
- ARU or Auditory Response Unit. This is referencing the methodology of over the phone processing. When a merchant is set up with an ARU solution, they are given a telephone number and merchant number so they can call in a transaction, from where ever they are doing business at the time. This solution however, is limited to only Visa and Mc or credit card transactions. There is currently no way to do Debit with an ARU solution.
- Virtual Merchant or Virtual Terminals. Very similar to an ARU set up again this product is only available for Visa and Mc or credit card transactions. Instead of a phone number, the merchant is issued access to a url, where they will enter their transactions online from anywhere they are, all you need is internet access and a virtual merchant is accessible!
- E Commerce. This is an ever growing solution and lined to Website processing. If a merchant is looking to do mobile transactions from their website, then E commerce is the solution. This is also mobile in that, customers can purchase online at any time.
- Virtual Merchant + Pin Pad Hybrids. This is Exactly like the Virtual Merchant as explained as option #2, however, there is an external pin pad that plugs into the computer, which allows a merchant the option to swipe a card and do Debit and Credit Card transactions. This is a fabulous mobile solution as you can take any payment type physically and still have the convenience of a Virtual merchant account for instances where you don’t have the pin pad with you.
- Cellular Terminals. Just like a cell phone, the cellular terminal is completely wireless, and offers the benefits of all 4 afore mentioned solutions. With a wireless terminal you can always swipe a transaction for Debit or any Credit cards. This is the best mobile solution as a merchant will always have the security of a physically swiped transaction.
There are constant changes and additions to these types of acceptance solutions as merchant services have to pave the way for new mobile options to keep in tune with the merchant’s ever changing demands. Pricing may vary, obviously with increase in convenience comes cost.
The Top 15 Canadian Credit Card Processors
August 9, 2010 by Admin · Comments Off
There are many processors’ here in Canada, some are Member Banks and some are independently ISO’s. Here are the top 15 payment processing providers in Canada, starting with those associated with Member Banks. The list in in no particular order.
- Moneris – founded in 2000, it’s an extension of Bank of Montreal and Royal Bank.
- Chase Paymentech processing since 1985, extension of Scotia Bank.
- Global Payments in existence since 1970, CIBC affiliate.
- T.D Merchant Services – 1980 was when this member bank broke out to include merchant services.
- First Data Merchant Services, originating in 1988 as an extension of TD Bank.
- Elavon / Nova payment Systems – originating in 1991, they broke into Canada from the U.S, most well known for “Costco” processing.
- CollectivePOS – founded in 2001, Collective is a fast growing ISO, supported by Elavon and First Data for Merchant Services.
- VersaPay – beginning in 2005, fast growing providing all basic services, supported by Chase Paymentech.
- Cardex – starting in 1995 with affiliation to Global Payments.
- Tangerine – having grouped with Elavon for processing most recently, Tangerine was started in 1999, just at the cusp of deregulation.
- Monex – working with any of the member banks for support, Monex has been in business since 2001.
- Inkas Merchant Services – founded in 2001 Inkas works their services through Elavon and Open Solutions.
- First Canadian now Canmore – supported by Global Payments, they are fast growing in Canada, having begun in late 2005.
- Merchant Account Services – processing for 5 years, having started in 2005.
- Millennium Payment Systems – new in the industry, and fast growing.
It is best to do your “homework” before signing any contracts, this basic list can be a helpful guide in contacting possible providers.
Most Common Reasons A Merchant Account Application is Denied
July 23, 2010 by Admin · Leave a Comment
Sometimes, even though we have completed an application for Merchant Services, a merchant can still be the subject of a declined application. Not all applications are guaranteed approval, and although Visa / MC maybe able to provide structured approvals it’s not applicable to every profile and there is the reality of a straight out declined application. Let’s take a closer look at these factors and map out some of the top reasons why a merchant application would be subject to decline.
TYPE OF BUSINESS: All merchant service providers have restricted and prohibited business types. These are businesses who’s very product, conduct or type of service provided is considered high risk to Visa and MC (without even taking a transaction). These pre-determined restricted businesses would include anything illegal, such as gambling, anything that poses a security risk like Gun Sales. Even “iffy” businesses whose business policy maybe to provide their customer with something the merchant themselves cannot guarantee like Financial gain. It is almost impossible to guard against this as your business is what it is, so sometimes, you just can’t offer Visa and MC services. This is out of your control unfortunately.
BAD PAST: Again another subject where we have little to no control over. If the merchant has anything in their past such as fraud, they can be declined. There is an industry “black list” that all applications are checked against (known as M.A.T.C.H) this is a database solely created by Processors who have been hurt by merchants who, in one way or another, have gone AGAINST their contractual agreement with their processor thus causing the processor to loose money. Once a merchant is blacklisted, they would have to absolve the issue with their previous processor directly to be removed. If the merchant is currently Bankrupt or has an un-resolved bankruptcy status in their credit profile, they will be declined services. Poor credit history may cause a decline, we look more into this in the following paragraphs. Things like excessive customer complaints resulting in a failure by the customer to pay Visa (also known as a “chargeback”) would be another factor to deny a merchant processing. They will decline any applications with a history of “charge backs”
LACK OF VALID IDENTIFICATION: When reviewing these applications, Visa and MC are looking for identification, security that who they are reviewing is indeed who they say they are. Having no sin, no driver’s license nor any other valid I.D. to support your identity or your business’ existence they will decline an application. It is best to provide Clear support documentation for your person AND business, to ensure that who ever is reviewing the application can easily Identify who they are dealing with, where and how you do business etc.
INCONSISTANCY: As per above, with regards to the Valid Identification one is providing, it should be in sync with your application info. When inconsistencies is a factor, it can and will lead to a decline. For example, business phone number should link a customer to the business….it seems like common sense but often times, the applications are lengthy and sometimes confusing. The worst thing one could do is provide info and support documentation that is different from what is on the application, or conflicting in any way. For example, if your GST Form, issued when you started the business, is not the same address as the current location, then this support document will not help. Always try to be consistent in the application and support documentation you provide.
POOR CREDIT BALANCE: and the word BALANCE is so important here. Visa and MC do adjudicate a person’s personal credit profile for obvious reasons. They need to support the lending request. The Business income projection is as much a part of the adjudication as the personal credit check, in that, they look at how much you are taking in, in an average transaction. They ask how much the business makes monthly in order to assess the level of lending required. If you have very poor personal credit and are doing transactions of over 500.00 and it’s a new business, there is no Balance in this profile…the ticket is high which means Visa /MC has allot to loose without even taking many transactions. The business is new so there is no history of success or monies coming in. The ticket in this example is too high for a poor credit applicant to be approved for such a large volume transaction request. It is just too much for the provider loose out on. The Credit and Lending requested (business volumes) must be in a delicate balance, otherwise, one can be declined.
Hopefully in studying this we can take preventative measures by noting some of the major issues that cause them to not approve an application and try to learn what “not” to do!
If you have been denied due to “poor credit” – don’t give up!
We can help! Often we have had HUGE success with getting approval on merchant account applications that have been declined due to poor personal credit. Fill-out our quote form here and let us know your situation and we’ll get to work ASAP!
Applying For a Merchant Account? How To Help You Get Your Application Approved Quickly
July 18, 2010 by Admin · Leave a Comment
Supporting Documents Is KEY To A Quick Approval
Often merchants do not understand why they need so many supporting documents to apply for a merchant account and by being dis-organized about your supporting documents can cause the merchant account application process take longer and even cost you an approval. Applying for a merchant account is like applying for a short term loan.
Visa & Mastercard often settle up with a merchant within 2-3 business days after someone pays a merchant business via credit card and yet they wait 30 days before they collect from consumers and often don’t find out until that time whether the merchant fulfilled your services and/or products to the consumers. Because there is this huge risk of chargebacks to the credit card processing companies they are very specific on supporting documentation about your business to determine the risk factors involved in credit card processing. Therefore, they will require very specific information before they approve your account. In this article we will discuss those typically documents required and how to have them all in order to make your application process run quickly and smoothly.
Visa, Mastercard and everyone in between who provides their services is looking at your merchant application as if you are looking at a request to borrow money! So there are a few important documents we can provide right up front to make sure they receive the security they are looking for before opening this “lending” agreement. The same sort of documents one would provide for a bank loan would or can be applicable to a merchant services application. These documents fall into two Catagories:
- Business Information
- Personal Identification.
Business Information: The best sort of document to provide to solidify or confirm your Business info, should include your business name (Operating As) as well as your business’ Physical Address, such as any of the following:
- Master Business License
- Previous Processing Statements
- Gst or Business Registration Forms from the government
- Reputable online listings
- Utility bills are all great sources to help them validate your business information.
Personal Identification: The secondary type of i.d. one should provide in order to ensure a speedy approval for merchant services is related to the Personal info for merchant who is applying. Essentially, they are looking to confirm the home address so any of the following documents are great:
- Driver’s License
- Social Insurance Number
- Citizenship Number
- Age of Majority Card
- Permanent Residence card
More so than the documents themselves, what Visa and MC are really looking for is what I have coined “THE THREE C’S”.
- CLARITY
- CONSISTENCY
- COHESION
Clarity: Be sure they can see or read the entire document, copy quality is always important.
Consistency: make sure the support documents you are sending are valid, up to date and are true, in that they show the real current information for things like physical location, as you have presented it on your application.
Cohesion: it must flow, and make sense, for example, it is hard to believe one would have an industrial manufacturing business out of their home….so be sure what you are submitting is subject to common sense.
Now that you understand that applying for merchant account services is more like applying for a short term loan you can better understand their point of view. If you follow our recommended “THREE C’s” you will be more likely to receive an approval! If you would like to deal with a experienced merchant account broker who has proven track record of approvals by helping merchants organize their 3 C’s use our contact form here.
Where is the CVV # on Credit Cards?
July 8, 2009 by Admin · Leave a Comment
I have had a few merchants recently not understand what the CVV # is on credit cards and how they can use it to protect themselves from potential fraud and/or chargebacks. In the image (the left) shows you where to find the CVV number on credit cards.
It is a three or four digit security code on your credit card. If your customer is prompted to enter that and it matches the security code on file the transaction goes forward, if it doesn’t match it is flagged and the transaction is halted. It’s important to match this up on mail-order and telephone-order businesses. I’d also incorporate it into my e-commerce shopping cart too. It’s not a 100% fool-proof, but it is just one more measure that enables Merchants to protect them selves from credit card fraud.
