Does your business accept credit cards?

Can you verify customer checks quickly and accurately?  This is what Merchant Services are all about - getting paid quickly for your merchandise and service without taking on undue risk.  

If you're borrowing money or using credit from your own suppliers in order to give credit to your customers, you should be able to raise sales and cut expenses with a well thought out Merchant Services program.

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I've heard it's hard to get approved

Most banks and other companies which offer merchant services are brokers - they re-sell services that are actually provided by other companies.  Many times, they are not familiar with the reasons behind decisions; they just follow the course of least resistance by turning away any business they don't understand.

New businesses, home based businesses, mail, telephone and internet-based businesses need to deal with a direct provider of merchant services rather than a broker.  Old-line, well-established businesses can also save money by going direct and cutting out the middleman's markup.

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Why is my credit report so important?

Many people are surprised when credit enters into a merchant services application - after all, isn't it just a matter of whether or not the customer's credit is good?

It's more complicated than that.  First of all, your customers can cancel credit card purchases - even after they get the merchandise.  Most reputable credit card processors pay you within 3 business days even though your customers have 30 days (or longer!) to cancel the sale.  By advancing you the money before the cancellation period runs out, the processor is extending credit to you for the amount of each sale.

Further, your Merchant Services provider is relying on your word to the effect that the transactions you are putting through are genuine - that you are making a bona-fide sale to an authorized user of the credit card or checking account.

When customers cancel credit card sales, or if you make sales transactions which aren't genuine sales, the disputed amounts are charged back against your checking account.  This is time consuming and expensive - for the merchant services processor, for your bank, and certainly for you. 

Charge backs are bound to happen, but the idea is to keep them to a minimum.  One way the processors do that is to look at personal and business credit - good credit histories have turned out to be a reliable predictor of low charge back rates.

Does this mean that if you or your business has some "credit dings" you can't get approved for merchant services?  Not necessarily - if you work with an experienced provider.

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How much does it really cost?

Processors have 2 general ways of charging for service - "bundled" which means that you pay one rate, and "unbundled" where you pay for each service you use separately.  Bundled plans usually charge a higher "discount" rate -  this means that you give up a higher percentage of each sale in order not to be changed transaction fees.

Which is better?  You need to compare - just be careful never to compare a bundled discount rate to an unbundled discount rate.

Most unbundled plans will charge you for each transaction in addition to a monthly account maintenance fee.  

Do you think that accepting credit cards can add $100 a week to your sales?  If so, you can afford practically any plan on the market.

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What should I watch out for?

Be careful about unbelievably low discount rates on a bundled plan - can the rate be adjusted upward?  If so, how soon and how much?

Are you getting toll-free authorization service, or will your first phone bill shock you when you find that you're making toll calls?  This is especially true for "short haul" local-long-distance "LATA" calls.

Does the processor offer help in reversing charge backs?  Sometimes, charges are reversed by card issuers for purely technical reasons - does your processor have the ability to get these taken care of, or will they just pass everything back to you (and raise your charges or cancel you when the number of charge-backs gets too high)?

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Do I need a special checking account?

Most of the time, you don't.  You can have funds deposited (and they will be wired in - so be sure that your bank can make you comfortable with their ability to handle "incoming ACH traffic) into the account of your choice.  However, you should be aware that charge backs will reduce your account balance, so you need to keep a cushion in your account just in case.

Many merchants prefer to keep their credit card receipts in a separate account for just that reason.

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Here's where to get more information

There are two things to consider in a merchant services plan. 

One is the service provider - the company that handles your authorizations and processes your individual charges.   Is your provider able to give you the service you need at a fair price?

The other part of the picture is where you keep the funds.  Can your bank give you timely credit for the deposits your provider will wire in?  Will you have real-time access to your account information so you can know where you stand at all times?

For more information on choosing a service provider click below -

For more information about a specialized bank click below -

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