Is Your Merchant Account Set Up Correctly?

I just finished reading a press release from a competing company. In the release the president of the company wrote,

“Everyone is trying to come up with a better system. There isn’t one. It is just about rates…the only thing that gets the merchant’s attention is, ‘How cheap is the rate?’”

From my experience this president is expressing an industry wide view. The result is merchant account sales people low balling base discount rates and hammering merchants on their surcharges. Is anyone reading this paying 3.5% for “non-qualified” transactions? Then you know what I am talking about.

Here is a typical example:

A business goes shopping for a merchant account and their goal is to receive the lowest rate. This business does 20% of its transactions face to face and 80% by phone. When they call around they receive a quote of 1.59% and they go with that offer believing they received the best offer on the market place.

Here are the problems with this example:

1. The rate of 1.59% is great for a generic consumer card that is swiped in the store but on every other type of transaction the rates are hyper inflated. Since 80% of there transactions occur over the phone they pay 2.75% for all those transactions and there effective rate comes in at 2.95%! Not what they expected.

2. In order to provide such a low rate the merchant account provider set the account up as a retail account. The result is whenever a customer calls in to make a purchase with a Visa card and provides an incorrect zip code the rate jumps up to 3.20%. If the merchant account provider had focused on setting up the account in the most beneficial way for the merchant they would have set up the account MOTO and the zip code problem would not be an issue.

My point here is that when searching for a merchant account provider, price is not the only item you need to pay attention to. Other issues to consider are:

• Surcharges (on rewards, business, corporate, signature preferred, etc cards)
• Transaction Fees (price, attempt vs. capture)
• Account type (retail, MOTO, E-commerce, restaurant, hotel, auto rental, etc.)
• Account pricing model (gross or interchange plus)
• Transaction qualification
• Equipment prices
• Early termination penalties
• Customer service

Questions for You

Now for the questions – is your merchant account set up correctly? Are you really paying the lowest amount possible for your account? If you have any doubts, contact me and let’s do a review. You may be surprised by the results properly setting up a merchant account can provide.

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