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.
