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+++ S P E C I A L R E P O R T +++
"Merchant Accounts"
E-Tailer's Digest Members

31 March 2005
Hi All:
The response to the Merchant Account post has been so great, that we are dedicating this issue to one topic - Merchant Accounts.  My thanks to all who contributed this valuable information.  Folks, this could be one of our most important digest, if you sell retail.
We welcome your comments on this topic and any other topic that would be of interest to list members.  You don't need the answers - ask the question, which is how this thread started.  Topics of interest to list members can be classified into:
A.  Growth - differentiation, sales, advertising,  marketing, e-commerce, merchandising, trade shows & seminars,
B.  Operations - merchant accounts,  security, logistics, shipping, taxes, accounting & legal,
C.  Technology
D.  Customer Service
Let's hear from you, so we can get more valuable information for our list members.
Now, let's get to everything for the retailer.


George Matyjewicz, PhD
Chief Global Strategist, GAP Enterprises, LLC

 [2]  Merchant Accounts
One of the things that's really important for beginners to know about merchant accounts, is that it's important to compare prices and read all the fine print before signing on the dotted line. 
Another important bit of information: If there's anyway to avoid it, don't "lease" software or card swipe machines. Buy what you need outright. If you don't, you'll get locked into a noncancellable contract and spend a lot more than you would if you bought the software or equipment outright.
We have a number of articles about the basics of getting a merchant account here:
For those who already have a merchant card and see their business growing, it's a good idea to check and see if there is any limit on the dollar amount of transactions you can process a month. There often is, and if you don't ask to have it raised, you can wind up hitting the limit before the end of the month and losing sales because of it.  The time to ask about having your limit raised is a couple of weeks before you hit the limit for the month.
--Janet Attard
Business Know-How Small Business Resource Center
Free newsletter: www.businessknowhow.com/subscribe.htm

+++ [Next Post] +++
Besides banks, their are other sources of securing a Merchant Account.
    1.  If you are a member of Costco
    2.  ISO - Independent Selling Organizations
    3.  Even your ISP may be a reseller of Merchant Accounts.
Since most e-trailers sell on the Internet, always tell your provider you are a MOTO - Mail Order Telephone Order Merchant.  If you tell them you swipe the card and your customers come in to your store and you are really a MOTO type business, and the provider finds out you do not swipe the card, you will be black listed, loose your merchant account and your funds will be frozen for up to six months.
The next issue is what is the difference between Swipe Card for Brick and Mortar and MOTO.  The fees you are charged.  As a Swipe Card, here are some general rates, depending upon your ISO your rate may be lower or higher depending upon your credit capability and the underwriting that the ISO performs on you.  Remember these are general rates not in stone:
                        Visa - Master Card        Swipe   1.59%            MOTO        2.29%+
                        American Express                      3.50%+         MOTO        3.50%+
There is also Discover Card and some other type cards available.  But my recommendation stay with Visa and MasterCard, with so many individuals having Bank ATM/Credit Cards stay with the lower rates of Visa and Master Card. 
Also you should also understand that Visa and Master Card will charge a higher rate for Corporate Credit Cards.  There is also normally a additional charge of approximately 30 cents for processing the charge, plus you could be charged a Monthly Bank Statement Fee and Also minimum monthly volume requirements. Plus also a monthly gateway fee to process your sales. To get what some charges are, and Inovium Corporation is a reseller, you can go to:  http://www.electroncifunds.com and you will see a link called Merchant Accounts and you can see the terms and conditions that we require.
The normal turn around for you to receive your payment is 48 hours.  Now do not count the day you post, if it is after 5 PM EST.  That is the normal cutoff.  Also make sure you provide the ISO a blank check so they do not make any mistakes.
Now here are some areas you have to be aware of:  If you do not keep records and you are sloppy, and one of your fine customers protest the purchase and you get a charge back you will loose.  Also Visa and MasterCard really do not give a darn for the Merchant.  They will always take the side of the Credit Card Holder.  Now here is the real rub, when you get a charge back, besides the full amount of the charge, you will be charged the discount rate plus a $25.00 fee.  Beside that if you get a lot of charge backs, guess what their is a good chance you will loose your merchant account.  You as the Merchant have to be careful who you sell.
If you get an order and you never sold to that person, and the order is larger than your normal sales, and they want it by express delivery within 24 hours, it is a good chance you are being scammed.  If you are a download type entity and someone places a real large order, call your ISO / Processor and to verify that the credit card is valid.  Also if they are buying a product, that say you normally sell only to B2B type customers and this customer is a B2C be careful.  Also if you are in the US and they are in say London and you never sold be careful.  Just because a card gets approved does not mean you will get paid or if you do get paid in about 30 to 60 days you will have a chargeback.  This is not to scare you, because most of your sales are from legitimate buyers.  It is the few rotten apples that will hurt you and hurt you badly.
Besides credit cards,there is another way of getting paid and that is through Electronic Check.  This is another option but again the key operative word is BE CAREFUL with any payment type.  If you want to find out how Electronic Invoice and Present Payment Services function go to http://www.electronicfunds.com for a full understanding of Merchant Accounts and Electronic Payments.  Again do not be scared of these type of payment systems, they have been around for a long time, the real key you have to be careful when your process, don't get all hype with the Sale especially if it smells wrong.
Yours truly
Jules Kaplan
Inovium Corporation
702-254-6385    FAX 702-926-9629
+++ [Next Post] +++
I have a couple of watch-outs! Last year we caught over $20,000 of fraudulent orders, all from, or being shipped to Nigeria.
Telltales; Orders larger than normal, orders with the same product ordered more than once, orders from a US address but being shipped overseas, anything from Nigeria.
If you have a doubt about an order, call your merchant account service/bank right away.
To get set up to take credit cards, call your bank first. If your bank does not provide this service, we have a few listings for independent service providers on our site: http://www.nmoa.org/sponsors/cc.htm
Tips for order taking: For the people that do not like ordering on-line, make sure you have a toll free number on your product pages. Don't hide it.
Best regards,

John Schulte, President and Chairman
National Mail Order Association (NMOA)
Tel: 612-788-1673

+++ [Next Post] +++
I started my first Merchant account with my bank and it was painless. That was 15 years ago.  Today, I know the process is far more complicated with so many options.
When it came time to change banks I could possibly have moved the account but I opted to go with the new bank merchant account with a lower rate.  It has worked out perfectly.  Since the bank that holds my merchant account is my "neighborhood" checking/savings I always have an instant support system if I have a problem.  
I started with Visa/Mastercard but have since been given American Express and Discover without a great deal of paperwork.
On an occasion, I tried to open a merchant account with a website shopping cart deal and the paperwork was awesome and I got denied!
So if you try your friendly banker first, it could be the best way to go.
I am interested what others have found.
Patty Sachs
+++ [Next Post] +++
I'm a long time reader, find this list often helpful, and would like to share some recent experiences with a client around merchant accounts and setting up for online e-tailing. I'd like to start with a key piece of the merchant account equation, the shopping cart.
First, my gig is helping smaller businesses bridge the information and technology gap to use the Internet to support their business. To newbies the Internet can be a financial black hole. Even with a big budget, it is easy to get bogged down in technology. Basically I help my clients find Hyundai level Internet solutions while most often they're bombarded with Mercedes solutions. In plain English, my approach works great for businesses new or young to the Internet, maybe not so much for businesses with many years of Internet experience.
One of my recent clients asked me to help put her business online. She sells direct to retail stores and wants to expand to sell direct to consumers online. I pulled together a list of shopping cart software, set them up, and we evaluated them at length. She wound up happily paying for Pinnacle Cart. And she signed up with PayPal to handle her online transactions. She also signed up with QuickBooks for handling offline transactions. She should go live in a month.
But here's what intrigued me: the free open source carts (e.g. osCommerce, ZenCart, others) did not meet her basic needs. And while WorldPay, 2Checkout, and other payment vendors offered good/great rates, PayPal was very competitive. Given that PayPal is owned by eBay, my client felt PayPal had more potential long term viability.
Other useful results from this client: she needed QuickBooks integration, the ability to export sales data to her QB software. While osCommerce has a plug-in, that cart turned out to be a nightmare to customize and change the interface. Remember, my clients have little or no technical skills, not even basic html. Another criteria she had, that many e-tailers probably have, is the ability to either shut off registration or bunde registration into the sales process, making the name, address, phone, email data fields do double duty by populating the data tables for sales info and the marketing info (used later to let customers know about specials, for example). My client believes that customers might abandon their carts if they have to fill out too many pages. Amazingly, a few of the carts we tested did not let her shut off registration and one or two carts did not bundle registration with the sales input form(s).
In the end, my client chose Pinnacle Cart because it has a very user-friendly interface that non-technical users can figure out by clicking around. It has a lot of functionality (like QuickBooks export, bundling the registration process) and flexibility that can be modified by clicking checkboxes and radio buttons.
I mention shopping carts at length because while merchant accounts are important, it's the cart that has to work with the merchant account. And not all carts are equal just as not all merchant accounts are equal. In fact, my client found me through a relative after having had a few rip off experiences with other Internet vendors, including sellers of merchant accounts. My client figured that she could easily have spent many thousands of dollars when only a thousand or so was really needed to get started with more functionality. In her case, she wanted to spend less because this is a test of whether or not she can expand her business. She can write off $1-2,000 dollars but blanched at $4,000 plus.
The other point I would make about merchant accounts is that nowadays many big banks like Wells Fargo offer rates similar to WorldPay and other online vendors. So it is possible to get reputable, moderate cost merchant account capability without all the hidden fees and flim flam I found with some vendors. My client also found that even QuickBooks had a little flim flam in their pitch to her, she had to ask a few tough questions to find out the true cost of their services. So, bottom line, it is still caveat emptor.
Hope this is helpful. Feel free to trim if appropriate.
Tim Slavin
Red House Communications, LLC


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