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,
D. Customer Service
Let's hear from you, so we can get more valuable information for our
Now, let's get to everything for the retailer.
George Matyjewicz, PhD
Chief Global Strategist, GAP Enterprises, LLC
 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
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.
Business Know-How Small Business Resource Center
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Besides banks, their are other sources of securing a Merchant
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
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%+
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
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.
702-254-6385 FAX 702-926-9629
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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:
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.
John Schulte, President and Chairman
National Mail Order Association (NMOA)
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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
I am interested what others have found.
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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
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.
Red House Communications, LLC