Essential Tips to Opening a Payment Processing Merchant Account
If you want to start accepting credit card payments online for the first time, then this article is a must read. Before obtaining a merchant account, make sure you shop around and do your research. Let the buyer beware certainly applies when choosing a merchant account provider, as there are many important aspects which need to be considered. Making a poor choice is likely to result in numerous complications and high unexpected ongoing costs.
Often, businesspeople new to online business will focus on one merchant account issue: discount rate. A discount rate is the flat percentage taken from each credit card transaction by a merchant account provider. Although getting a reasonable rate is important, there are many other charges, fees, limits and business considerations that need to be considered. Issues like customer service, provider reputation, and how a provider performs risk assessment on your business are all important.
10 tips to consider before choosing your merchant account provider:
1. KNOW YOUR NEEDS – Do you want batch (manual) payment processing or real time processing? If you expect low volume sales then manual processing may be a viable route. Before approaching merchant account processors know your actual or expected margins, transaction volume and internal resources. What will your hardware, software and service requirements be? You can go directly to banks or ISOs for merchant accounts, however putting together all the components to e-commerce (catalog system, credit card processing, order system, billing system, etc) can be a nightmare. This is where sometimes it can pay to partner with a ‘holistic’ payment processor which may charge slightly higher rates, but can provide complete and secure payment processing merchant accounts.
2. 24 HOUR PAYMENT CUSTOMER SERVICE – Not only is it wise for you to get 24 hour technical support for your merchant account, but also of great importance is 24 hour payment support for your own paying customers. Providing 24 hour telephone payment support on your website for high volume sites could increase sales by 20-30%, especially in the early stages whilst you fine tune your site.
3. RELIABILITY & INTEGRITY– Check the merchant account providers trading history and try to get testimonials or reviews of the processor. A dishonest processor can tack on declined transaction charges in numerous ways, so it is important to work with a reputable processing company. Common complaints against merchant account providers include sudden rate increases, long term lock-in contracts, hidden fees and add-on charges, high monthly-minimums, heavy rolling chargeback reserves, high chargeback fees, and surprise monthly processing limits.
4. SPEED OF SERVICE – If it takes more than 3-4 business days to get your merchant account up and running, then start questioning the setup and capability of a processor. Likewise if approval is instant or overnight, alarm bells should also start to ring. Setting up a new merchant account should take 2-4 days to allow for a thorough risk assessment and appropriate account setup.
5. FEES – Make sure you gain full visibility of all fees (application, setup, statement, transaction, discount rate, and fraudulent transactions – chargeback’s). Ask for a full disclosure of ALL merchant account fees and charges before signing anything! Also bear in mind that depending on your business setup; your merchant account processor may have to hold a reserve on your account.
6. UNDERWRITING AND RISK ASSESSMENT – Before approving a merchant account, the merchant account provider will underwrite and perform a risk assessment of your business and business model. Find out if your business will be classified as “High Risk”. If you trade in a high risk industry such as adult, travel, dating, or pharmacy, then you will have to approach a high risk merchant account specialist.
7. FRAUD MANAGEMENT – Chargeback’s and fraud related charges can be a very high cost for some online businesses. Make sure you protect your profits by using a processor that has a sophisticated and comprehensive fraud management system. A large variety of methods to minimize fraud should be in place on your merchant account including customer details verification, geographical location cross-checks, and known fraudster database cross-checks.
8. HIDDEN CLAUSES – Read the fine print. Read ALL of the fine print. Too many people today skim over the content of a service contract, which in the payment processing industry is very unwise. Be warned, low rates rarely equate with merchant friendly policies.
9. INTERNATIONAL BUSINESS - A card from outside of the processor's country results in what is often called a non-qualified rate, which can result in a fee of 3.50% - 6% of the sale. If you expect card payments from more than one country, try to choose a processor that has an international payment network, who also supports transactions in multiple currencies. If you wish to advertise to multiple markets, a multi-currency and multi-lingual platform is a must to maximize your revenue potential.
10. MONTHLY LIMITS - As a precaution, many merchant account providers will impose limits on your monthly revenue intake. Processing more than your limit, in some cases will also result in held funds. The length of time the funds are held depends on the risk factor and the bank with which you deal. Should you surpass the limit that the bank is willing to allow for more than three months, you may receive an immediate termination letter. Look for a merchant account that is flexible with your needs. Some merchant account providers have policies with generous limits or no limit at all.
Take a wide perspective on factors such as sensible policies and superior customer service when choosing the best provider for your unique business needs. Evaluate security protocols, reliability, and the degree of customer care your business will receive. Every business is unique, and the best merchant account provider for each business will vary from one provider to the next.
About the Author: Damien Gough is an experienced online business development specialist, who has assisted a variety of internet start up businesses spanning the United Kingdom, USA, and Australia. He has multi industry experience with general ecommerce sites such as recruitment, retail and manufacturing, as well as sites such as dating and travel which require high risk merchant account services.