7 Steps to Understanding Merchant Accounts
What are Merchant Accounts?
This is a brief description of what a Merchant Account is.
A merchant account is the ability for a business owner to accept credit cards or checks at his/her place of business in a retail atmosphere or online, over the Internet. The merchant account allows a merchant to accept the credit card transactions and check transactions which get processed and deposited into the merchants' bank account.
Merchant Account Info
Ultimately only a bank can provide a merchant account but processors can sell via agents by a sponsoring bank and under the umbrella of that processing bank. The agents are acting on the processors behalf on signing up merchants. The agent may represent themselves as their own payment processing company but are selling merchant services from a processing bank.
Merchant Account Steps
Merchant Account Step 1 -
You need to have a business license as a merchant through the city even if you are a sole proprietor. If you do not have a tax id you can use your Social Security. Once you have obtained your business license you can go to your local bank and open a business account and get started in accepting credit cards and checks.
Merchant Account Step 2 -
The next step would be proving to the bank that you have a retail store to sell your product or service. If you do not have a retail store you need an online store or some type of marketing or selling material to present to the bank for legitimacy amongst other things.
Merchant Account Step 3 -
The processor will be looking for what you are selling, how much you are selling it for and what your refund policy and service policy, this is a requirement of Visa and MasterCard.
Merchant Account Step 4 -
You as a merchant must be careful of what type of marketing techniques are being used due to charge backs. You are usually allowed up to 1% of sales for a charge back or dispute of charge. A charge back is not a refund or return. Visa and MasterCard has a right to terminate your account and you need to practice good business, whether it be online or in a retail atmosphere.
If you are switching from another processor we typically look at those previous statements to see how placement is done. Having some Charge backs is ok but have to be within the tolerance of certain guidelines.
Merchant Account Step 5 -
The Application Process
How long does the application process take?
Usually in a rush type of situation it can be done in 24 hours and in some cases an MID# can be issued within the hour. Typically, its usually not the case but we will do everything possible to expedite the situation if possible.
What is the Underwriting Process?
The underwriting process looks at a number of items and typically a retail account is 99% approved. We have to look at the personal credit of that person applying for a Merchant Account. If they wont sign personal guarantee then it defaults to business credit.
A Merchant Account is like a short-term line of credit. For Example: The Merchant can accept payment and have the funds settled in their account in a matter of 2 days without service or product being received. That's why the bank must look at your personal line of credit and other measures as a safety net for legitimizing who you are.
What is a Reserve?
The same system works when you are applying for a credit card and can be based on credit score, financial history and high-determined cash flow could cause for a reserve.
In very small cases there is a reserve requirement for the high risk Merchant. If you were considered a high risk and have a reserve account if after several months or more we can get that reserve back for you we will due to in house underwriting.
Merchant Account Step 6 -
High Risk Merchant Accounts
What is considered High Risk?
We also have to review the product type that is immediately delivered, future type delivery service or annual membership programs are at more risk.
A criminal background check is done and cross check information as well as whether or not termination from another processor was happening. If you are switching from some other processor we look at previous statements to see how placement is done. Having a few Chargebacks is ok but have to be within the tolerance of certain guidelines.
Electronic companies are at high risk along with others that go into the specialty area, which include Canadian Merchant, and Off Shore Merchants. The rates are higher and advantages are that we have solutions for what you have to offer. In very small cases there is a reserve requirement for the high risk Merchant.
If you were considered a high risk and have a reserve account and if after several months or more, we can get that reserve back for you. The underwriting is done in house and the decision of reserve control falls on us and can be filtered back slowly if Merchant is in good standing. We can provide this service for the Online Merchant or the Retail side of processing as well.
What businesses do not qualify for processing?
Cigarettes and cigar companies and including pharmaceutical accounts are not qualified. The adult services market is very difficult to get approved unless you are doing high volumes. Also, new travel agencies and lotteries and replica goods. Anything that has an FDA taint to it is nearly impossible to get approved.
Merchant Account Step 7 -
Merchant Account Fees
What Merchant Account fees are involved for a Merchant to accept Credit Cards?
There are usually two main types:
Payment gateway fees which usually consist of transaction, monthly access and setup fees. Then you have the merchant account fees, which consist of three different levels, which fees are bundled according to what type of merchant you are and what risk you, fall under.
What is a Payment Gateway?
A payment gateway is a switch between a website that is processing the transaction and the payment processor who authorizes the transaction. Basically, a switch that barricades fraud and it allows transactions to be collected, encrypted and monitored for suspicious payment practices.
The speed of the transaction is usually around 1-2 seconds. They have good interfaces for reporting so that you can look at all your credit card information. You can see if it settles in batches or voids and you can separate real time processing in different websites and virtual terminal transactions.
What about International Merchant Accounts?
We have great relations with BankCard and our gateway is available and is a less expensive version, and you do not need corporate license in another country. Typically its $695.00 to setup the merchant, which is a great rate and probably the cheapest entry rate. The rates are 5-7% with a reserve and allows you to settle in U.S. dollars wherever you're at. We have a second relationship for those with a larger merchant base that process more then 50k monthly and can settle in sterling pounds, euros or yen.
How about Canadian Merchant Accounts?
We have a relationship with Nova Canada, which we can settle in Canadian dollars or U.S. dollars in Canadian Banks, and we have great pricing and set up is about 1 week, it uses our gateway system and has excellent fraud screening.
Merchant Accounts to Accept Checks
What does it take to process checks?
It is more dangerous to use checks online rather then using a visa or Maser Card. A red flag always arises when a customer wants to use a check rather then a credit card. Think about it this way. Why would someone not have a credit card or debit card in this day in age? This can pose a concern when customer wants to use a check online. We have a real time e check solution, which are similar to visa's checks online. In the retail world we have two solutions we can do check representment in all 50 states through Western Clearing Corp. We can due recurring transactions and high risk and credit only. Check guarantee at point of sale and check 21 compliant and verify through star debit networks and our collection rate is 85-90% which is very effective.
There are 3 types of Check Transactions:
Check Verification: Verify against negative database where just charged transaction fees.
Check Guarantee: where you are charged % of transaction and are guaranteed payment on that check.
Check Truncation. Converted the check to an electronic transaction and the merchant hands the check back to the merchant. The check is checked against the national bad check database and the check is checked against Thompson database for accurate account numbers. They verify negative database, positive database as well as their own and also verify through avs.
InfoMerchant Merchant Accounts
Here is a list of things that are offered and a breakdown of Merchant Account Services & Information:
• Electronic Check Conversion*
• NCN® for Check Verification**
• Check Guarantee
• Online Checks
• Electronic Funds Transfer
Check Collection Services
• Traditional Check Collections
• Electronic Re-Presentment
• Licensed in all 50 States
• 24 Hours a Day
• 7 Days a Week Incl. Holidays
• Toll-Free Access
• Web-Based Support
• E-Commerce Enabled Web Site
• Online Transaction History
• Online Bank Account Access
• National Business Directory
Transaction Entry Options
• Point of Sale Terminals
• Online Website
• PC Software
• Browser-Based Virtual Terminals
• Touch Tone Telephone
• Fax Machine
• Wireless Terminals
We offer the best prices and are extremely competitive offering integrated solutions, so you can process all your electronic payments through one provider instead of working with various competing companies.
Simply the lowest prices around for credit card processing solutions.
True 24/7 support who is interested in seeing your business succeed. We stand by our products and services.
We can point you in the right direction and advise you on the best Merchant Account Solutions for your business whether you are high risk business, U.S. based, Canadian, International, or just looking for the best rates.