Merchants who anticipate a high volume of credit card transactions – especially those who are launching new businesses – may find it more difficult to secure credit card processing capability.

Here is a merchant account truism: All merchant account providers hope that each of their customers accept a great number of credit card transactions per month.  Indeed, the more business owners amass in credit card sales, the higher the generated commission.

The irony is that merchant account providers exercise great caution when a new business owner indicates that he/she anticipates a high monthly volume.  Here, the underwriting and risk departments look at the worse case scenario: What if chargebacks soon ensue and the high volume merchant does not have sufficient funds in the bank to cover the chargebacks?  (The merchant account provider must then provide restitution to the merchant’s customers.)  Without any prior credit card processing history, it is difficult to predict the potential likelihood and frequency of chargebacks.

This is especially true of an Internet business where there exists a greater possibility that fraudulent transactions occur.  Consequently, an e-commerce high volume merchant account may be deemed high risk.  In contrast, a new merchant who opens a retail establishment, anticipating a blooming business with a myriad of credit card sales, should find favor with most merchant account providers.

Still, the new business owner who predicts a flourishing Internet merchant account can more readily obtain credit card processing capability with a very favorable credit score.  Merchant account providers may deem a merchant who possesses credit worthiness as an individual who merits merchant account worthiness.  (Some merchant account providers will allow a merchant to secure a cosigner in the scenario that the cosigner has a stellar credit rating.  However, the more volume that is requested, the less likely an Internet merchant account application will be approved – even with a cosigner serving as a “safety net.”)

A high volume merchant account (at least $50,000 in monthly credit card processing) may also propel an underwriting team to request a business owner’s bank statements.  Once again, the merchant account provider needs reassurance that the merchant can cover chargebacks, should any be initiated.  For example, a new merchant with less than $5,000 in his/her bank account may be hard pressed to find a provider who will accept an application with an indicated monthly processing volume of $100,000.

The underwriting team will look at other factors, such as the average ticket and highest ticket.  If these amounts are relatively modest (say a few hundred dollars), there is a greater likelihood that a high volume merchant account will be granted.

Of course, merchants with established businesses may be better candidates to secure a high volume account.  After all, they have prior credit card processing history that can reveal a high level of credit card processing activity.  Even if prior processing does not reflect great volume, however, the underwriting team may be more predisposed to granting a high volume if there have been few, if any chargebacks.

There may exist a caveat to approval: A merchant account provider may impose a reserve where a portion of the merchant’s proceeds go into a reserve account, controlled by the provider’s acquiring bank.  The reserve covers disputed charges, fees and other expenses, and the funds are eventually transferred to the merchant, typically within six months.  While any merchant would not like to have cash flow impeded, a reserve may be the only way that a provider offers high volume credit card processing capability.

Fortunately, with a plethora of merchant account providers and banks to choose from, any merchant who anticipates a high volume of credit card processing should be able to find a vendor amenable to assume the inherent risks of such a business.  But by undertaking the risks, the merchant account provider optimizes their rewards.  A high volume merchant account should provide a win-win proposition for merchant and provider.    

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To learn more about our merchant services, please visit http://www.intell-collect.com

John Q. Customer calls up his card-issuing bank, claiming he does not recognize a charge.  The card-issuing bank representative is very understanding and tells John that the matter will be investigated, and the merchant will be contacted via a “retrieval request.”

First things first: The card-issuing bank contacts the merchant’s acquiring bank (the bank associated with the merchant account provider), and the credit card processing company is soon notified as well.  Joe Q. Merchant thereafter receives a retrieval request, asking him to provide evidence that John Q. Customer authorized a transaction and that the goods or services were provided.

This retrieval request is not a chargeback; it’s a pre-chargeback as a chargeback can ensue afterwards if Joe Q. Merchant does not comply with the request, or fails to provide transaction documentation within a specified period of time – generally within 10-16 days.  Joe Q. Merchant needs to find a signed receipt (i.e., credit card receipt and/or delivery receipt) and forward the information as soon as possible to the merchant account provider or acquiring bank.

Unlike a chargeback, a retrieval request does not necessitate that the transaction funds are automatically deducted from Joe Q. Merchant’s bank account.  However, many merchant account providers charge a modest retrieval recovery fee. 

Joe Q. Merchant’s task is now to provide as much evidence about the authenticity of the transaction as possible.  He wants to avoid a chargeback, the concomitant chargeback fee, and of course, the possibility of losing funds associated with the transaction itself.  Unfortunately, despite his best efforts, a chargeback may still occur.  In fact, a chargeback may be initiated even without a retrieval request.  Another scenario may materialize: A chargeback may not follow the retrieval request – a happy circumstance for Joe.

Hopefully, the matter can be resolved quickly and to Joe Q. Merchant’s satisfaction.  Perhaps John Q. Customer simply did not recognize the doing business as name of Joe’s company or simply did not recognize the items that he purchased.  But Joe should be prepared for the worse case scenario and be ready to deal with a chargeback, should one result.

Receiving a retrieval request may be construed as an early warning signal to Joe.  A customer is questioning a particular transaction, so Joe needs to be organized and thorough in his approach, and present the particulars of the transaction in an expedient fashion.  (Saving receipts, even those that are several years old, is a vital business practice!)

By responding in a timely, professional manner to a retrieval request, the risks of receiving or even losing a chargeback become minimized.  It’s important to refrain from alarm when receiving a request; constructive action, not immobilization, is warranted.      

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To learn more about our merchant services, please visit http://www.intell-collect.com

In today’s competitive market place, businesses pull out all the stops to entice customers to purchase their goods or services. One of the most common marketing tools is to give away something for F*R*E*E*. Yes, that’s F*R*E*E* in capital letters, bolded, with stars between each letter, not “free” in small case. Companies ensure that they stress the word “free” – akin to knocking them upside the head with the proverbial two-by-four – so that they will sit up and take notice that they can get something, anything without paying a red cent, plug nickel or cool dime.

If you are a business owner, you may be reading this article as you are considering accepting credit card payments. The first step would be to select a merchant account provider. With virtually thousands to choose from, this is not an easy task. Just to warn you, merchant account providers (MAPs) are not above pulling out the free trump card to gain you as a customer. No matter how attractive the offer, it is imperative to first look at the big picture by reviewing each MAP’s fee structure, customer service policy, etc. before signing a contract.

Free Credit Card Terminal: Are they really free?  

What is the free offer of choice by various merchant account providers? In many cases, it is a credit card terminal. This may entice those strapped for cash. However, upon further inspection it may be discovered that with the free terminal come higher fees – such as annual, batch or termination fees for example. These increased fees may more than offset the price of the terminal. In fact, over a period of time, an individual may pay, in additional fees, two to four times the initial cost of the terminal. Although you may believe that you are “making out like a bandit” you should ask yourself, “Am I really getting something for nothing?”

Depending on the needs of your business you may require a:

·        Basic terminal – average cost $150 to $300

·        Terminal with printer – average cost $200 to $600

·        Wireless terminal – average cost $600 to $1,000 

As you can see, terminals are not extremely pricey pieces of equipment. Therefore, before signing with a MAP to accrue a free terminal, you should first ask yourself, “Is what I’m saving upfront really worth it?” To answer this question you must:

·        Compare and contrast various MAP’s fee structures – are they more when a free terminal is added? If so, by how much?

·        Note if there is a termination fee - Some MAPs who do not usually include a termination fee, may add one when offering a free terminal. How much is the fee? For example, if your terminal was $300 and there was a termination fee of $250, would the free terminal (which is not much more than the termination fee) be worth it if you wanted to terminate service for whatever reason? This example does not include other increased fees that may apply such as annual or batch fees.

·        Take into account the retail value of the terminal – if it’s a basic terminal for example, will the increased fees pay off the terminal within a few months while you are left paying the higher rate over the lifetime of your contract? However, the increased fees may be worth it if you are receiving a more expensive wireless terminal.

·        Inquire if the terminal is new or reconditioned – the chance of experiencing difficulties with a new terminal is obviously less than with one that is reconditioned.

·        Read the terms and conditions thoroughly – what happens if the terminal breaks? You want to ascertain that you will not have to wait weeks for a replacement or while your terminal is being repaired.

Types of Credit Card Terminals included in free offers. Are all the amenities included? 

A few credit card terminals included in some merchant account providers’ free terminal packages are the Hypercom T7 Plus, Hypercom T4100, Nurit 8320 and even the wireless Way Systems machine. Although respectable terminals, upon further inspection, you may discover that some of the terminals do not include a pin pad or a printer if the machine does not have one built-in. Although you receive the terminal for free, depending on the needs of your business, it may be necessary to purchase additional equipment. Once again you would need to ask yourself, “Is the overall package going to save me money in the long run?”

It is only human nature to become excited over the prospect of getting something for free. However, when it comes to matters of business, this is not usually the case. Companies often have an ulterior motive when giving away something for free, even if only to “get you inside their door” to entice you to buy their particular goods or services. Although a perfectly acceptable marketing tool used by millions, are you really getting something for absolutely nothing? In most case, the answer is no.

When a merchant account provider offers a free terminal, it is usually to assist those who may not have the money to purchase a terminal outright. They will recoup their money by increasing fees in other areas. That is not to say that cost effective free terminal packages do not exist. However, it is up to you, the consumer, to look at the fee structure of different merchant account providers to assure that you are receiving the best deal overall. It may be determined that it would be in your own best interest to come up with the money to buy a credit card terminal – no matter how financially strapped - to save money over the long haul.    

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To learn more about our merchant services, please visit http://www.intell-collect.com  

Although many business owners use the terms, “return” and “chargeback” interchangeably, they do not have the same meaning.  A merchant return is simply a means to repay a customer who decides not to keep a product or retain a service.  Often, when a return is initiated, a merchant may credit the customer’s account on the same credit card that was used initially at the time of the transaction.  Store credit may also be an option when a customer requests a return. 

The business practice of a return is between the merchant and the customer, and does involve any third party, such as the merchant account provider, it’s acquiring back, or the cardholding associations. 

In contrast, a chargeback typically involves third parties.  Here, the customer does not announce his/her dissatisfaction with the product / service or bewilderment in receiving the charge, to the merchant but rather to the card-issuing bank.  The merchant is eventually notified and can try to “win back” the funds that were taken away as a result of the chargeback.

A chargeback triggers an “investigation” where a committee will decide on who is entitled to the funds.  Nevertheless, the merchant is liable for a chargeback fee (typically $25) regardless of the outcome.  (A return is generally assessed as a transaction fee, averaging 25 cents.)

Although no one likes to pick their poison, business owners would unanimously declare that they would much rather be hit with a return than a chargeback.  Although both may initially result in negative cash flow, a chargeback necessitates a greater processing cost and may more readily result in lost funds.  At least, businesses that refund a purchase in exchange for store credit come out even or even ahead if the customer decides to purchase other items.

Visa and MasterCard, merchant account providers and acquiring banks also prefer refunds rather than chargebacks.  Consider the scenario when a merchant is assessed a chargeback for a $1,000 sale.  In the midst of personal economic turmoil, the merchant has already spent the funds and cannot pay it back to the merchant account provider.  The merchant’s bank simply does not have any funds to withdraw.  What happens as a result?  The merchant account provider and acquiring bank must refund the funds to the customer’s card issuing bank, who in turn, will credit the customer.  Of course, the merchant account provider will seek restitution of the funds, even legally, but this is an added expense of time and money.

Consequently, many merchants don’t realize that if their chargeback ratio is 1-2%, their credit card processing account may be closed.  Surprisingly, even refunds are calculated in this ratio, although their assigned “weight” is less than actual chargebacks.  (I don’t know the formula but I’m guessing that 5-10 refunds equal one chargeback.)

Ethical and fair-minded business owners, especially those who run businesses with solid past credit card processing records, need not worry too much about the possibility of a closed merchant account.  As time elapses, the relationship between the merchant account provider and business owner develop and a great sense of trust between both entities develop.

Of course, the objective of any business owner must be to eliminate or reduce the frequency of refunds and chargebacks – both of which can hinder a business’s growth.  Indeed, refunds vs. chargebacks is a losing game for any merchant.

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To learn more about our merchant services, please see http://www.intelli-collect.com  

When a business owner opens a merchant account to accept credit cards, a protracted list of terms and conditions are provided.  Invariably, many of the stipulations are written in legalese and difficult to fully understand.  Nevertheless, ignorance of the rules governing merchant accounts may not serve as a suitable defense for a merchant who may find his/her account terminated due to a transgression.

Therefore, it is crucial to take the time to read the terms and conditions, and subsequently, exercise caution and grounded common sense when you begin the process of accepting credit cards.  Here is a brief summary of credit card practices that are not permissible.

-         When you open a merchant account, it is for your business, and not for any other entity.  Of course, you may want to help a friend who just needs to process a credit card or two.  While you may be inclined to share your account, please refrain from doing so as this is against the cardholding associations’ regulations.     

Consider this scenario: Your friend receives a chargeback.  Upon investigation, your merchant account provider discovers that the transaction was not even related to your type of business.  Consequently, the merchant account provider may decide to close your account and place you on a Terminated Merchant File (TMF) where it will be almost impossible for you to open another merchant account.

-         Similarly, only accept credit cards for the exact business that you indicate on the application.  If your hosting business is approved, for example, you cannot accept credit cards for an unrelated business, say your part-time book-selling business.  You would need to set up another account for such an enterprise.

-         You cannot surcharge your customers for using credit cards.  While merchants have the discretion of building the processing fees into their total price, they cannot itemize their fee structure, indicating, for instance, that 3% is assessed for credit card fees.   

-         An owner who runs a business that accepts credit cards (i.e., offers credit card payment as an option) cannot dictate to customers how they should or must pay for purchases.

Last year, I was in a small store where the merchant initially refused to accept a credit card for a large purchase.  (Perhaps his profit margin was slim for this item.)  While I usually do not intervene in matters that are none of my business, I explained to the merchant that he was in violation of merchant account rules if he indiscriminately refused to accept payment for particular goods with a credit card or declined to accept a credit card from a particular person.  He quickly reversed course.

-         Cash is a different form of currency than credit cards.  You should not, for example, give the customer money in exchange for charging his/her credit card.

In an analogous vein, if a customer returns an item purchased on a credit card, you must not offer cash back.  Cardholding association rules dictate that the return must be made on the same card used for the initial purchase.  (Alternatively, the merchant can provide store credit or an exchange.)  

Please note that the return policy should be disclosed to customers at the time of purchase.  (This vast majority of business enterprises violate this rule!)

-         It is taboo to request that a customer sign a blank sales draft when the final price has not yet been determined.  It is easy to see how disputes may arise if this were not the case.              

-         While you have the right to ask for a given customer’s identification at the time of a purchase, this cannot serve as a determining factor of whether to accept the customer’s credit card.  Furthermore, writing down a customer’s credit card information on a sales receipt or check may violate state law.  (Become more familiar with your state law that governs the accepts of credit cards, if possible,)

-         You cannot impose a minimum amount per transaction for a customer to use his/her credit card.  A number of stores have signs that they cannot process credit card transactions that are less than $5 or $10.  Such stores can be reported for violating cardholding association rules.

In addition, you cannot impose a maximum amount for your customer’s credit card use.  However, if a given transaction is higher than the highest ticket specified on the application, it is important to alert your merchant account provider.

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While the above “do not list” is not an exhaustive one, it should help steer you in the right direction, away from trouble that may materialize.  You don’t need to incur any penalties from the powers that be.  Your business needs to accept credit cards but you must reduce or even eliminate any credit card processing related “issues.”             

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To learn more about our merchant services, please see http://www.intelli-collect.com