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.
“Stop Sticking It To Us” Coalition Applauds Senate Committee on Banking
March 6, 2009 by Admin · Leave a Comment
I found a really interesting press release yesterday released by Retail Council of Canada (RCC) and the “Stop Sticking It To Us” coalition, representing over 200,000 small and large businesses where they are appluading the Senate Committee of Banking for moving forward with an investigation of Canada’s credit and debit card system.
Canadian Merchants pay some of the highest credit card processing fees in the world. The average rate in Canada exceeds over 2%, where in places like Australia the average rate is about 1% and in the UK about 0.79%. This means that Canadian businesses have to pay about $200 or more in processing fees for every $10K processed. This doesn’t just affect Merchants this affects consumers too. If merchants costs go up then consumers costs will raise too.
Credit card companies claim they need to charge these premium rates due to all the cards now that have reward points attached to them. I don’t think anyone disagrees with paying for services, I think all Merchants want is a fair deal.
I really hope the Senate Committee on Banking, Trade and Commerce really sees this as a real issue and addresses it swiftly. If you are a small business, what are you thoughts on this issue…? Let us know in the comment section below.
