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.
Mismatched Totals or Out of Balance – How To Fix
August 12, 2010 by Admin · Comments Off
You’re tired, it’s late and you want to go home. After an exhausting day you have just one task to complete on the Point of Sale terminal and that is your end of day settlement. Usually it is a two minute task but tonight when you go through the normal procedure the terminal is telling you that your sales are out of balance and ‘do you wish to continue’ with the settlement.
The answer is “yes”, complete it and if you’re tired deal with the out of balance tomorrow?
At this point you may be asking why wait until tomorrow and our response is simple:
You’re tired, go home and get some rest. Every reputable POS company has a reporting system that you can view online the following morning. You never “lose” money per se. In almost all instances the out of balance will probably have something to do with a communication error resulting in a cardholder being charged twice and this can be resolved easily.
POS systems and/or networks are not infallible, somewhere down the line there will be a failure of some sort and Out of Balance would be the most prevalent. There are basically only two reasons why a terminal will show you a mismatched total.
1. You attempted a transaction and received a communication error such as “Timed Out” or “Comm Error”. You then proceeded to re-swipe the customers card and complete the transaction. Occasionally, what will happen is that the host will approve a transaction and during the last leg of approval back to the terminal the transaction will cut off, i.e. disband thus the Comm error. This can happen because someone picked up the phone or perhaps you have not disabled call waiting and someone called while the transaction was being processed. Either way, the transaction was completed at the Host level but not at the Terminal level and the result will be the cardholder being charged twice although the terminal only has it once. Ergo, your end of day will be out of balance.
2. The second reason is similar to the first but in reverse. The card itself is only swiped once and it is approved at the Terminal level but this time the last leg of the transaction has gone back to the Host side and a communication occurs. The terminal says approved because the Host has sent an approval yet it is waiting for the terminal to send a message saying that Yes it has received the approval. If the Host network does not receive this message, the transaction will be “reversed”. When this occurs, the merchant is required to fax a copy of the transaction (not the transaction list) to the POS provider. Since the funds for the transaction would have been returned to the cardholder, the POS provider will request that the funds be sent to the merchant account. This process can take between five and ten days.
In brief, funds are never irretrievable and although the extra time needed to resolve an out of balance can be frustrating, it does not have to be. Check your online reports daily and feel safe that you will never lose money.
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.
The Critical Payment Processing Guide for Canadian Merchants
March 30, 2010 by Admin · Leave a Comment
The Critical Payment Processing Guide for Canadian Merchants
Discover how this Guide has helped 100’s & 100’s of Canadian business owners cut their payment processing fees by 10-30% and sometimes much, much more. If you are brand new to merchant account services, then this is the perfect guide for you… it’s takes most people about 15-20 minutes to read.
In this guide you will learn…
- What a Merchant Account is & Why Essential You Know How Your Business Will Transact Before Applying for Merchant Services
- How Not to Be Fooled by Ethically Questionable Merchant Account Companies’ Marketing Tactics
- How to Avoid the 3 Most Common Mistakes Merchants Make When Choosing a Payment Processing Provider
- The 18 Essential Questions That Will Protect You from Costly Hidden Fees
- How to Become a Seasoned “Pro” at Understanding How Credit Card Processing Rates Work Through Real Life Case Studies
- How to Save On Merchant Processing Fees with These 3 Insider Tips
- Learn How to Find the Perfect Payment Processing Solution for Your Business Needs Without Having Any Remorse Buying
Ready to get started on the guide…? Click here to become a merchant service pro.
The Difference between a Retail Merchant Account versus an E-commerce Merchant Account
July 23, 2009 by Admin · Comments Off
There are a few major differences when dealing with a Retail Merchant Account, and an Ecommerce Merchant Account. Both are similar in that, a merchant or seller is able to accept Visa, Master Card, American Express and Interact, as a method of payment for goods and services rendered, but the way they are accepting these transactions is where the differences lie.
Merchant Services applications are always looked at in terms of safety and security. Visa and mc need to take into consideration, when and where the point of sale is taking place, as there are some risk factors they need to take into consideration when adjudicating weather or not the business is fit to accommodate transactions…..these risk factors contribute to the major differences between getting an approval for a Retail account VS. a Ecommerce Account. Let’s take a closer look at these risk factors and the 5 major differences between processing a transaction in a retail environment compared to an online situation.
- Card Acceptance. This is the main driving factor or difference between the two types of transaction processing. Visa and mc consider this a risk factor because in a retail situation, the merchant ALWAYS obtains a signature from the customer directly on the receipt. It is difficult for a customer to reject a fee from a purchase when the merchant is able to supply a signed receipt as confirmation of the transaction. With online processing, the availability of that signature is slim to nil, so Visa and Mc will rely on the solidity of the business profile to reduce or cancel out the possibility of a merchant disputing a fee. So the will scrutinize the business profile more thoroughly, as they do not have the comfort of relying on something like a signed receipt.
- Fulfillment. This is an industry term. Basically this refers to the amount of time between finalizing a transaction for goods and services and when the customer receives those goods and services. for example, If I go for a haircut and pay visa, I have received my service and paid right away….if I purchase a swimsuit online, I make the payment right away (ecommerce billing) but, I do not receive that product for 2-3 or how ever many weeks, whatever the FULLFILLMENT time is….this creates another risk that will be looked at before approval. it is a major difference to pay for something and wait for it, then to instantly have what you’ve purchased.
- Product Availability and Presentation. Unlike walking into a store and picking out your “size and color” when shopping online you are only subject to one form of presentation, usually a picture or image of some kind to represent your purchase. Whereas, in a store you can touch it, feel it, try it on, etc. Digital images are helpful to represent your product type, but there is still a down home difference between being able to see and touch as opposed to a 2-d image.
- Product Type. The internet provides a platform never before available to business. So more “intangible” goods and services now have a home online whereas things like financials services, learning or educational seminars, software sales were vague and expensive to advertise in order to obtain a customer base that kind of thinking is in the past. E commerce is ideal for these types of businesses that differ greatly from retail in that they are providing a service that does not physically exist.
These are just a few prime examples as there are many businesses that thrive online, where as the platform may not be as successful to others. The bottom line is, that the internet is a wildly new exciting tool for businesses to reach out to an audience never before imaginable. Malls will never close, but the internet is competing with how and where our shopping dollars are spent!
Canadian Credit Card Processing Wars
April 28, 2009 by Admin · Leave a Comment
Tim Wilson at the NationalPost wrote yesterday an interesting piece on Canada’s Credit Card Wars over regulating interchange and allowing Visa to introduce debit cards in Canada.
Tim states, “While we respect businesses’ desire to manage their expenses, government intervention is not the right solution in a functioning industry.”
I know many Merchants who would be as fast as a wild cat and pounce on this statement. However, after reading more of what Tim had said in his article reminded me how important credit cards are to a business. Tim states:
“Retailers benefit from the speed, efficiency and reliability that only electronic payments can bring. They also receive guaranteed payment and can avoid the need to extend credit directly to their own customers. According to the economics firm Global Insight, over the past two decades, electronic payments have contributed $122-billion to the Canadian economy, which represents nearly 20% of our total GDP growth over the same period.”
In reality, without credit cards businesses would not be able to be as profitable as they are. Just try and imagine how a website would be able to transact without the ability to accept credit cards or even by phone. How would your business sales be without credit cards…?
The REAL ISSUE (if you read between the lines) that merchants are really complaining about is they feel they are paying too much in fees. It always comes down to the “$”.
Now I am all for keeping Merchant processing fees as low as possible. The issue really isn’t Visa and/or Mastercard with their Interchange rates because the interchange rates are not that high. If you have really high rates it’s usually due to your credit card processing company. This is Moneris, Global Payments, Chase-Paymentech, Elavon, First Data, TD Merchant Services, and other sub ISO’s who also broker credit card processing services. They make their money by marking up on top of the interchange rates and they really understand interchange.
Let’s use Tim’s example of:
“Visa Canada’s premium product, the Visa Infinite card, is available to a small subset of cardholders and its interchange rate, which is the small amount of money transferred from one financial institution to another each time a Visa product is used, is one fifth of one percent (0.2%) higher than other card products.”
What merchants don’t understand is how interchange really works and how the Merchant Account companies that sell/set-up merchants are the ones who can sometimes mark-up those rates big time. So if the card present buy rate for a non-reward card is approximately 1.6% for most categories of business and then the infinite card is 0.2% higher that would make the buy rate 1.8%.
Now many Merchant Account Companies will offer those card present cards at almost cost (let’s say 1.7% – only 10 basis points higher than cost) but they’ll mark all infinite cards by a full 1% higher making the Merchant pay 2.8% on those transactions. Now this could be good or bad for your business, it’ll depend on how many of your customers will pay using an infinite card – which you will not know until you are processing.
The question again is do you really understand how your customers transact with you…? If not you will want to figure it out.
This is where it is important that the Merchants understand how interchange works for their type of business category and/or the way their business will transact. By understanding this they will have a better chance at securing competitive rates because they can then look at the interchange tables and understand what the buy rates are from their type of business. However, as long as the Merchant remains uneducated on how all this merchant processing really works they will continue feel confused, alienated and over charged.
Now there have been some major shifts in the industry that have compounded these issues.
“In 2008, Visa introduced the first significant change to its interchange rate structure in 30 years, which resulted in some transactions attracting a higher interchange rate and others attracting a lower rate. Even with the change in structure and the introduction of the Visa Infinite cards, Visa Canada’s effective interchange rate has remained relatively flat at 1.6%. Interchange rates for Visa Canada are transparent and are available on our Web site.”
What people don’t realize is the change in the interchange structure is not really the problem. The REAL challenge is in educating merchants on how all the fees work. They are really just upset because they don’t understand why they are being charge more for some cards and how all their fees have change so much over the last year. The transparency has not been there and so they feel lied to or even like they have been swindle.
And sending a merchant in fine print 60 days before the change that their rates are going to change is NOT being transparent nor is that any kind of education on how it all works.
I don’t blame Merchants – I’d feel the same way if I were in their shoes. Again, as usual with anything in life – it breaks down to poor communication between the card processors and merchants. Which is fine with me – because it’s this type of poor communication that keeps me in business. 
I take the time to explain and help merchants understand how all these complex merchant MDR’s work and how to structure an application that is competitive and fair to both the merchants and the card processors.
Regardless, of what I think…what do you think…? Let me know in the comments below.
Accept Credit Card Payment With Your iPhone!
March 2, 2009 by Admin · Leave a Comment
Ever since I purchased my iPhone about 6 months ago, my mind has really opened to where mobile payment processing is going. Just look at this awesome application for payment processing on the iPhone.
It is my personal opinion the future of merchant accounts and the payment processing industry is going to be very closely tied to our mobile phones.
Too bad it only works with US merchant account(s). I think I will try and get this iphone app to work with a Canadian Merchant Account service provider.
Does anyone know of an iPhone credit card processing application that works with a Canadian Merchant Account provider…? If so, please let me know in the comment section below.
Why do Different Payment Processors Have Different Rate Structures?
January 9, 2009 by Admin · Comments Off
Many different processors are out there who offer merchant services. Weather the services are provided through a Member Bank or ISO, every application is subject to a very similar adjudication from Visa and Mastercard. Different processors do however, have different rate structures. There are a few reasons as to why these differences exist.
Let’s look at two of North America’s top two providers of merchant services, Elavon and First Data Merchant Services.
Elavon broke through the industry by offering rates that are closer to interchange than any other provider. How were they able to do this?? Well, they came into the market through Costco, a very big business buyers club who deal exclusively with Business to Business retail. As Costco was already dealing with a customer base made up solely of business owner’s, they saw the potential for their entire customer base to utilize their own Merchant Services program. Costco was able to ensure Elavon a certain volume of processing annually, so in turn, Elavon was able to offer rates lower than competitors at the time. This is one of the factors that will cause a major difference in a rate structure: the very volume of customer’s the processor has, will allow them to be more competitive. When providers host these buying clubs, they can charge a different rate structure as again, the volume is guaranteed to make them money.
On the opposite side of the spectrum, some providers like, First Data Merchant Services, have higher rates. This is a result of a few different factors, the most prominent being the RISK involved in hosting an account. When the risk of loosing money on processing for a merchant is evident, the provider will charge a higher rate right at the point of transaction, to ensure that they cover any assumed losses. The riskier the business, the higher the rate; To protect the provider from loosing money right from the point of purchase. Allot of merchant services will not provide credit card processing at all for potentially high risk accounts and restricted business types, so merchant’s will pay the higher rate just to be able to offer the services.
The way in which the processors present their rate can sometimes be different as well. Right now in the industry, processors have Interchange, the basic “cost” handed down from Visa and Mc. Sometime, processors will have “tiered” transaction pricing, meaning that for qualified cards you pay one rate, and for specialty, club, corporate or points cards, there is additional rate structure. Other processor lump everything together, for one base rate. So depending on how the processor’s presentation of the rates, you will see a difference.
At the end of the day, the differences between what the processors provide are minimal. Every processor is victim of interchange and the rates will only differ depending on the processor’s customer base, the risk involved in boarding the account and the way in which they present the different levels of card processing costs. It is best to do research when looking for a provider and remember that the differences in the rate are subject to negotiation as well.
