My Merchant Account Blog

Choosing a United States Merchant Account

Friday, April 14, 2006

If you are in the United States and need a merchant account, you have hundreds of merchant account providers to choose from. And the large independent sales organizations (ISO) and merchant services providers (MSP) usually rely on agents / resellers / partners to sell their services and products. This way they do not have to employ people to sell the services and the agent works when he / she wants to.

The first thing to look for in a ISO / MSP is to determine if they are actually an ISO / MSP. An ISO / MSP will usually look something like this :

Copyright© 2004-2011 CDGcommerce, Inc. All Rights Reserved.
CDGcommerce is a registered ISO/MSP for First National Bank of Omaha, 1620 Dodge St., Omaha, NE - Member FDIC.

This tells you who actually owns the company and what acquiring bank is used.

The footer for the agents / resellers / partners's  website of an ISO / MSP will look something like this:

Mile High Merchant Accounts .com is not a merchant processor.
Our Web site is an information resource site that provides information to educate merchants on available payment solutions.
We are a partner of CDGCommerce, who is a registered ISO/MSP for the First National Bank of Omaha.

It tells you who the ISO / MSP is and it tells you they are a partner with CDGCommerce.

Here is another example (Sam's Club):

© 2011 First Data Corporation. All rights reserved. All trademarks, service marks and trade names referenced in this material are the property of their respective owners.
Sam's Club Merchant Payment Processing is a registered ISO/MSP of Wells Fargo Bank, N.A., Walnut Creek, CA.

You always want to make sure it tells you in the footer what company it is, if it is an ISO/MSP or an agent and who the acquiring bank is.  If it does not, chances are that it could be a Internet Payment Service Provider (IPSP) (AKA Third Party Processor (3PP).  This could mean you might not have your own merchant identifier or the bank / company might not be located in the United States.  Using this type of provider can sometimes limit your monthly processing volume, fees costs more, and your money might not be automatically deposited into your checking account.

If you are in the United States, we suggest Mile High Merchant Accounts.  Unlike most other partners, their company is dedicated to helping businesses save money.  Their Executive Team has over thirty years of processing knowledge and has used this knowledge to your advantage.  You can rely on their ISO / MSP to provide you the most reliable processing in today's market.  And if your business has an online presence, their Internet merchant account rates is amove the most competive in the market.  By adding the Quantum Gateway to help process the credit card transactions, you can save money in gateway fees, fraud, and chargebacks.  Unlike most other electronic payment gateways, the Quantum Gateway was built with the e-commerce merchant in mind - providing enriched tools like fraud detection, state-of-the art reliable, flexible, secure recurring billing, a Virtual Terminal (versions for both desktop and mobile secure viewing / processing), batch processing, payment tokenization, IP filtering.  You will not find any other electronic payment gateway like it available in the United States.

Verified By Visa-MasterCard Secure Code-Things You Should Know

Tuesday, April 11, 2006

Verified By Visa (VBV) and MasterCard Secure Code (MSC) are two standards that Visa and MasterCard developed to protect transactions in a card-not-present (CNP) environment.  Two benefits that Visa and MasterCard boast:

• You are not liable for fraud resulting from the unauthorized use of Visa cards.
• Fraud on your site is reduced.

However, there are things that you should know re: VBV / MSC before implementing them on your web site.  They might not reduce the fraud as one would expect.  Yes, they do help with the "I didn't do it" chargeback: it could be the reason code:

75 - Cardholder Does Not Recognize Transaction

However, if you do a lot of recurring billing, VBV / MSC will not help you with these usual chargeback:

41 - Cancelled Recurring Transaction

The reason is simple - VBV / MSC require the cardholder's authentication.  And authentication is only done on the initial charge.  All recurring charges are usually completed by the electronic payment gateway and therefore, no cardholder authorization.

You also might run into problems in which the transaction has to be re-authorized.  Some merchants pre-authorize a credit card transaction for a certain amount until they are ready to ship the merchandise.  When they are ready to ship, they do a post-authorization / sale transaction in their virtual terminal.  Usually this pre-authorization only lasts a few days, depending on the issuing bank.  So if this pre-authorization has passed, you might need to re-do the transaction.  Usually the gateway does this without you even knowing the pre-authorization has passed.  And at this point, you are not protected.

If, by chance, the transaction failed to authenticate, you are not covered.

Sales that use the "one-click buy" technologies are usually not protected either. 

Now what you need to really know is this: If the credit card is Visa, and the cardholder is not enrolled in VBV, you can still be protected (as long as the transaction is not one of the above).  However, if the cardholder is in the United States with a MasterCard and not enrolled, you are not protected.  The MasterCard cardholder in the United States has to be enrolled and authenticated for you to be protected.

Some high risk accounts like adult entertainment and gambling might not be covered.  These rules vary actually per card association, so you would be best to contact your VBV / MSC vendor (not your merchant account provider / electronic payment gateway.)

Ways to Prevent Spam

Friday, April 07, 2006

When you go to a website, they almost always want your email address.  Most people have a at least two email addresses: one for family and friends and one for business.  Most of the email addresses people get are free, e.g. from live.com, GMail, Yahoo, Hotmail, etc.  There are pros and cons associated with these email addresses of course.  For example, if your personal "GMail" account is a bit too "personal", you don't want to give that out to a human resource department. 

So what's the best way to control spam, be professional, and friendly?  Get your own domain name.  Yes, that's right.  Go to a registrar, for example:

• www.GoDaddy.com
• www.Dotster.com
• www.Omnis.com

You do not need to know how to build a website.  You only need a hosting company, like TechEvolution, to host your email.  Let's say you and your significant other names' are Brad and Jennifer.  You can see if the domain name bradandjennifer.com is available.  If it is, this will cost you about $10.00 a year for registration.  Then you can use a company, TechEvolution or even go back to GoDaddy.

Once you set up your domain, you will set up a POP3 account.  What I have done is set up a personal email address that I give out to people I trust.  I then have what is called a "catch-all" - let's call it catchall@bradandjennifer.com.  So, when I go to Facebook, I set up facebook@bradandjennifer.com.  When Facebook sends out a confirmation email, it will be diverted over to this catch-all account.  I can confirm the email address. 

Let's say about a week down the road, you notice you are receiving a lot of email addressed to this email address.  TechEvolution offers SmarterMail as one mail server (another is Microsoft Exchange).

In the SmarterMail Web Control Panel, you can set up a filter to automatically delete any e-mail that is now sent to this e-mail address.  Of course, you will want to first change your e-mail address on Facebook first.

We don't mean to pick on Facebook, but we recommend that you do this for every company - Amazon, Bank of America, Wells Fargo, PayPal etc.  This also helps you immediately if you receive an e-mail from your bank telling you their has been a problem and you need to sign into their website by using a link in the e-mail.  If the e-mail is not addressed to, say hsbc@bradandjennifer.com, then you know it is a "phishing" e-mail.  Of course, you should always go to the financial institution's website.

You hear a lot about "breaches", but only the person's name and e-mail address was compromised, no 'vital' information to your account.  However, your e-mail address is important to you of course and not as trivial as they might want you to think.

Another option is to just open a free email account used for the message boards / forums / social media websites as well, but that could be another thing to do.  If you get your own domain name, you can easily save any / all e-mails on your local computer with an e-mail client, like Microsoft Outlook.

Multiple Merchant Accounts

I have three websites selling different items. I spoke with a merchant account agent and he told me I needed three separate merchant accounts. Why is this?

Now, on the agent's side: the more merchant accounts he sells, the more money he is going to bring in.  So of course, he wants you to have as many merchant accounts as possible.

You might not need three of them, it depends on what you are selling on all three websites. For example, if you are selling office supplies one and pet supplies on the other, chances are your DBA (Doing Business As) might not understood when the customer gets their credit card statement at the end of the month.  For example, you have applied for a merchant account for your online pet store - Wagg N Purr.  Your business is doing well and you decide you want to open another e-commerce store selling office supplies SortPlus).  You don't think nothing of it, so you add your electronic payment gateway (i.e. Quantum Gateway, Authorize.net) to the checkout process.  However, your customers are purchasing office products and they might not recognize Wagg N Purr.  This could cause you a lot of time explaining to the customer that the Merchant Identifier (MID) - Wagg N Purr - on their statement is for the office supplies they just ordered.  It might be too late also - they might have called their bank to request a chargeback (Non Receipt of Information Chargebacks - Chargeback Reason Code 75).

An Internet Merchant Account is not that expensive.  You will probably pay around $10.00 a month for the merchant account itself.  The electronic payment gateway (i.e. Quantum Gateway, Authorize.net) could be free to more than $100.00 a month.  The Quantum Gateway does not charge a monthly fee, no set-up fee, and no transaction fees.  The Discount Rate for an Internet Merchant Account is usually around 2.14%.  This rate could be lower if your volume is higher.  The merchant account provider will probably charge around 30¢ per transaction.  For this, we recommend Mile High Merchant Accounts - even if you do not process anything that month, you will be charged $8.00.  Most other companies will charge you a monthly fee, a monthly gateway fee, and maybe even a monthly minimum - this could cost you anywhere from $50.00 and up. 

Merchant account providers have different lists of products they consider high risk. This varies per provider greatly. So if you were selling two products and one was high risk you would want a separate merchant account for this. This way, if something happens and you experience a lot of chargebacks and the account is terminated, you other merchant account should be fine.

Another reason for two merchant accounts is to help your accounting department.  This way, money from Wagg N Purr will go into that checking account and money from SortPlus will go into that checking account.  This can easily allow the accounting department to pay bills appropriately.

Having two merchant accounts will help them know what money is what. If you are processing over $1,000 a month for each, there is really no reason not to have more merchant accounts.  Your money will get into your checking account faster than an Internet Payment Service Provider and as your business grows, it is a lot easier with a merchant account as your businesss grows.

This goes back again to what we have said about salespeople.  They might tell you it is OK to have one merchant account, but if you tell your merchant account provider (on your signed contract) that you are selling pet supplies but also start selling office products, the merchant account provider can suspend or terminate your merchant account.  They could even put you on the TMF or MATCH List. 

Here is another example, when you sign a merchant account agreement, the provider will ask you how much you expect to process each month, what do you think will be your average transaction, and what would be your highest transaction?  This merchant had been processing with the same provider for over a year.  He called the agent and asked if he could sell furniture.  The agent said that would not be an issue.  About a week later, instead of an expect high transaction of $500.00, the merchant ran a transaction of $3,000.00.  The batch was suspended until the merchant account provider could verify the transactions.  When the merchant account provider found out the merchant was doing another business, instead of opening a new merchant account, that provider terminated his account, and refunded that batch.  Unfortunately, the merchant had already shipped the goods.

If you happen to be on the TMF or MATCH List, this does not mean you cannot get another merchant account.  You might be required to pay a deposit, maybe a higher discount rate, or instead of getting your money within a couple of days, the provider might only pay out once or twice a week.  If you are honest with your merchant account provider, they might open a new merchant account for you.  Fortunately, Mile High Merchant Accounts was able to help this merchant account.  Of course, this is on a case by case basis.

Who Is the Worst Merchant Account Provider

Sunday, April 02, 2006

There is really no such thing as the worst merchant account provider.  There are some very large merchant account providers with a large client base.  There are some really bad agents though.  Keep in mind that these agents are salespeople.  They make money selling you an account.

Some of the larger merchant account providers (Chase / Paymentech, Cardservice, First Data Merchant Services, Ipayment) boast a huge client base.  With these merchant account providers, they do a significant amount of business per year.  For example in 2004, Cardservice, who is owned by First Data processed $10,270,500,000 in 123,800,000 transactions alone.  (update: First Data now owns Cardservice and operates as First Data Independent Sales).  The majority of these merchants use the LinkPoint gateway.  This is the same for Chase / Paymentech who First Data owns 50% in. (Update, Paymentech split from First Data).  They processed $254,949,800,000 in 3,448,800,000 transactions and $189,782,500,000 in 3,353,300,000 transactions respectively.

Cardservice has a very lax policy in their merchants.  They will approve merchants usually within 24 hours.  However, once all the background information has been obtained by that merchant (and it is not good: e.g. maybe the merchant is on the TMF list), the company will suspend or terminate the merchant account.  This increase Cardservice's statistics of course of hanving unhappy merchants.  And then of course when Cardservice suspends / terminates an account because of chargebacks or potential fraud, people tend to complain.  Whenever a merchant account provider says you will be approved within 24 hours, be cautious - complete vetting of the merchant cannot be done within this time period.    The MATCH list checks the business thoroughly, including the address.  So if your address happens to match an address on this list, your merchant account will be suspended until things get sorted out.

Internet Payment Service Providers or Third Party Payors

While Internet Payment Service Providers (IPSP) or Third Party Payors (3PP) allow you to basically use their merchant account, this can cause problems as well.  They have more rules and regulations to follow.  One individual even created their own site because he / she was very upset with Paypal: Paypal Sucks. There is also Screw Paypal (warning adult content). It also goes to prove what I just said above - lax policies with Paypal and Cardservice can actually cause more problems for them.  They try to help merchants start their business, but some merchants take advantage of that help and they try to actually rip off Paypal and Cardservice as well as their merchants.  And remember, you will always hear more complaints about a company than you will compliments.  It is human nature to complain more unfortunately.

Paypal is a pretty large aggregator.  Currently, on their site today they say they have over 96.2 million members.  With that size of client base, you are always going to find problems.  The longer you are with a company and the more you do business with a company, you will increase your chances of problems.

Some of the larger problems with Paypal is the verification process, almost similar to First Data Indepent Sales.  To get a Paypal account takes just a few minutes.  However, you need to be 18 years old and a lot of individuals seem to miss this in their Terms of Service.  Once Paypal finds out, your account can be suspended or terminated.  Your funds can be held for up to six months.

What To Look For Then

It seems like this post has been a bit negative, but it is what it is.  First, look for a merchant account provider that does not approve you in 24 hours.  To properly vet a merchant account, it usually takes three to four business days.  With this process, the merchant account provider is actually saving money. 

Most merchant account providers rely on resellers, agents, or partners (salespeople) to offer their products and services.  Some agents will overcharge a merchant in order to make money.  For example, more than a decade ago, it was not unheard of to be charged $1,000 for a set-up fee.  Now, you should not be charged a set-up fee for the merchant account.  Some electronic payment gateways will have a set-up fee.  For an Internet Merchant Account, we recommend the Quantum Payment Gateway - there is no set-up, month, or no transaction fees associated with the gateway.  Don't take for granted the salesperson will tell you the truth.  You will be asked to sign a contract.  See if this contract has a term (for example, one year, two years, or three years).  You should not agree to this.  If your business happens to fail and you sign a three-year agreement, you are still on the hook for these fees.  If you do not pay these fees, the merchant account provider can put you on the MATCH list and they are the only ones who can remove it.

Don't be afraid to ask questions.  While you are reviewing the merchant account, if you come across anything that you do not understand - email the reseller.  If the reseller gave you misinformation, you might be able to get out of your contract (if any).  It is always better to have things in writing.