My Merchant Account Blog

You Are Approved for a Merchant Account in Less than 24 Hours

Saturday, December 18, 2010

Being approved to accept credit cards on your website in less than twenty four hours sounds like a good idea.  Unfortunately, the merchant account processors cannot check the business to see if they are eligible for a merchant account.  Sometimes this can take usually three to four business days.  Some merchant account providers will give the merchant an account, hoping the merchant has answered the questions on the merchant account application truefully.  Sometimes this is not the case and by the time the merchant account provider has found out, the provider can be out thousands of dollars.  I have seen merchants approved in less than twenty four hours, and then four days later, then merchant account is terminated - either the merchant is on the TMF / MATCH or has other credit / financial issues.

By the time the underwriter finds this out, the provider could be out more than $100,000.00.  The merchant either closes the bank account or moves money to another bank account so the provider cannot retreive the money.  The customer requests a refund (chargeback) and the merchant account provider is unable to get the money back from the merchant.

How Much Money Did the Provider Lose?

The amount can vary of course, depending on the transaction rate / discount rate  / batch fees etc.  Some merchant account providers will give the provider a merchant account almost immediately if the volume is less than $30,000.00.  So let's base some figures on this.

During the Cyber Monday, 82 sites were shut down by Federal Agents.  Let's assume the just these merchants were able to process $30,000.00 each day for three days, $100.00 for each transaction, and the same provider opened each of these accounts:

The Fees and Losses

• $7,380,000.00 - Volume
• $161,662.00 - discount rate (2.19%)
• $18,450.00 - transaction rate (25¢)
• $61.50 - batch fees (25¢)
• $22,500.00 - Chargeback Feess ($25.00)

This adds up to $7,582,673.50 - chances are pretty good that merchant account providers lost a lot more money unfortunately in the past month.  The providers want the business, however without doing a thorough check on the merchant, the provider will possibly lose money.  To recuperate this money, the provider has to make it up somehow - usually by raising the fees of its current merchants.

When you take an order on your website, you scrub the transaction with different tools that are available to you.  You want to make sure the transaction is not fraud.  Otherwise, you are lose your product, time, and money.  Usually, the merchant account provider charges you a chargeback fee.

There are many things that you look for when applying for a merchant account (Cheaper Merchant Account Provider, Merchant Account Agreements, Choosing a United States Merchant Account) but most do not take this into consideration.  There are even merchant account providers that will actually charge you more if you do not use the most basic fraud prevention tool Address Verification Service (AVS) for United States consumers.

Set Up Fee

Tuesday, December 14, 2010

This is a fee charged when the merchant applies for a new account or when the new account is set up.  Most providers will not charge a fee for new accounts; some charge it before starting the account and others add it to later billing statements.

The fee can be free or it can be as high as $1000.00.

See also Application Fee.