Merchant Account Frequently Asked Questions
Listed below are frequently asked questions dealing with merchant accounts and payment processing. If you have a question that is not listed below, please contact us.
Can I use someone else’s merchant account to do my transactions?
No, this practice is known as “credit card laundering” or “factoring.” It is against the Visa® and MasterCard® agreement. Using someone else’s merchant account to process your credit card transactions can lead to heavy fines and perhaps more. In addition, you’ll also put that merchant’s credit card processing account in jeopardy.
Why are rates higher for Internet, Mail and Telephone Order transactions?
Face-to-face transactions where the credit card is swiped is considered less risky by banks. Since this is the case, rates are quite a bit lower as the instances of fraud and chargebacks are a lot less.
What kinds of credit card processing solutions are available?
There are a wide range of solutions for all types of businesses. Swipe terminals for retail merchants; real-time processing for Internet sites; PC software for mail order/phone order and Internet businesses; seasonal and mobile merchants; and virtual terminals for Internet, mail and telephone order businesses. Each have their own pros and cons, ask your sales representative which is best for your business.
Are Internet merchant accounts compatible with all shopping carts?
No. Shopping cart companies make their software compatible with certain secure payment gateways (ie. PayTrace, Authorize.net, Verisign, etc.) In addition, merchant account companies work with different secure payment gateways, so their clients can process credit cards online. It’s important to find out from your merchant account company what secure payment gateway you’ll be using. If it’s Authorize.net, you can expect most shopping cart companies will support that gateway.
What kind of transaction reporting is available?
Most merchant account companies will provide you a paper statement at the end of the month. Some companies can even offer detailed online reporting.
What is a monthly minimum fee?
This processing fee is collected by your transaction and discount rate fees from your credit card sales each month. So, for instance, say your merchant account company charges $25 as a monthly minimum, if the transaction and discount rate fees collected by the processing company add up and equal or go over $25 that month, no monthly minimum will be charged. However, if the fees for that month do not meet the $25 monthly minimum, you will then be charged the difference. You can avoid this fee in many cases by just processing a few thousand dollars per month.
** We do not charge minimum fees **
What is a Merchant Account?
A merchant account is a relationship with a credit card processor, that allows a merchant to accept and process credit cards. The merchant account will allow the merchant to swipe their customer’s credit or debit cards through a credit card terminal, or will allow the merchant to manually key in transactions. Merchant accounts can be set up in the name of an individual or by a corporation. Each location of a business with a single ownership must have its own merchant account. And, each website set up by a merchant that either has a different name or sells different products needs to have its own merchant account.
When setting up a merchant account, the merchant will specify what method they plan to use for obtaining information from their customers credit or debit cards. This determined method will also determine the cost that the merchant must pay to process their customers credit cards. The lowest cost for processing would be swiping customer’s cards through a credit card terminal. Keying in transactions or processing over the internet has a higher cost than swiping through a credit card terminal due to the higher risk associated with this method.
What are the requirements to setup a merchant account?
To setup a domestic or US based merchant account a merchant must have a physical location within the US and an American checking account. Once these conditions are met a merchant can apply for a domestic merchant account. If these conditions cannot be met a merchant must use an offshore merchant account.
Application requirements for all US businesses:
- Physical Location in the US.
- Checking account with an American bank in the name of the business or the merchant account signer.
- Explanation of business type (i.e.: LLC, Corporation, Sole Proprietorship, etc.).
- Federal Tax ID Number (EIN).
- Owner or Merchant Account signer’s SSN.
- Owner or Merchant Account signers address information.
- Product or Services being sold information.
- Exchange and Refund policies.
- Intended method of accepting transactions (i.e.: swipe, internet, keyed, etc.).
- General business location type (i.e.: Shopping Center, Home Based, etc.).
- Copy of a voided check from merchants checking account.
Additional requirements for businesses:
- Marketing material (i.e.: business card, brochure, advertisement, etc.).
- State or Federal Business License.
- Proof of business existence (i.e.: phone bill, utility bill, etc.).
- Proof or financial stability (i.e.: Balance sheets & profit and loss statements, etc.).
Requirements for all internet businesses:
- Active website with DBA of website listed on application.
- Product delivery methods and time-frame clearly stated on website.
- Product prices in US dollars.
- Privacy Policy listed on website.
- Customer Service telephone number listed.
- Secure checkout system.
- Domain name registered to merchant.
Business to Business (and G2B) Merchant Accounts
What is a B2B or G2B Merchant Account?
A business to business merchant account is a special merchant account for organizations and government agencies that sell primarily to other businesses, and government agencies. A B2B merchant account will allow your business to accept credit cards with reduced downgrading that is seen with standard merchant accounts.
How is a business to business account any different?
There is a 3-tier system that is used for domestic credit cards when they are processed. Tier 1 is a normal consumer credit card, tier 2 is a corporate level card, and tier 3 is procurement cards.
Processing Level Chart
With a standard merchant account, everything but tier 1 transactions will downgrade, which increases the costs of processing the credit card. A company will not know if an individual card will downgrade until that card is processed. By using a specific method of processing, you can include level 2 and 3 data with a transaction. This will make level 2 and 3 transactions cost nearly the same as a standard consumer credit card in many cases. For level 2 processing, most standard credit card terminals and payment gateways can be used. For level 3 processing, special software must be used in conjunction with a level 3 processing service. We can set up just about any type of business on a tier 2 or tier 3 processing account, whether it be a card-present swiped account, a keyed entry account, or an ecommerce website.
Do I need a business to business merchant account?
This depends on the percentage of level 2 and 3 transactions that you need to process. If you only accept a few level 2 and 3 transactions per month, then there really isn’t any reason that you would need to be setup with a business to business account. On the other hand, if you sell a significant percentage to other corporations and government agencies, or you are a government agency, then chances are you could save a great deal of money each year by switching to a business to business merchant account. Also, if you have extraordinarily high tickets for B to B then you will need to setup a special account.
How Much Can I Save if I Have a High-Ticket Size?
If you are a large ticket size business that sells mainly B2B, then an average of 30% savings over your current processing charges is common. We often see a larger savings than 30%, but this savings will ultimately depend on your current rate structure, the method you are using to capture your credit card information, and the actual cards your customers are using to pay.
What is the Business to Business software?
Our business to business software package will allow you to process you credit card transactions through a web browser based Virtual Point of Sale program. Our software can be integrated into an online store system used manually, or integrated into an existing back office system such as SAP.
The software supports Visa, MasterCard, AMEX, Discover, and Diners Club, and supports all types of transactions from consumer, corporate, business to government cards.
The software will automatically apply certain requirements to your transaction to qualify your tier 2 and tier 3 transactions, saving your business costly downgrade fees.
We have found that for many businesses, this software and business to business setup can pay for itself on the first transaction.
I’m Still Unsure.
If you are unsure as to your business needing a business to business account, please feel free to call or email us. We can further explain the benefits of a business to business merchant account, and help you decide whether your business would benefit from a business to business solution.
Regardless of your ticket size or yearly volume, we are confident that our solution can meet your processing requirements and save your business money.
How long does it take setup a merchant account?
The time that it takes to get approved depends on the type of business and the intended method of processing that the merchant is planning on doing. The times listed are based from when our company receives an application.
Retail Business (Swiped Transaction):
For retail businesses it is common to get an approval within 24 hours or even on the same day. Including programming the terminal and shipping to the business, the total setup time is around 3 – 4 days.
Internet and Keyed in business:
Internet businesses usually take 2 – 3 days to get approved and an extra day to get the payment gateway system programmed. This is also assuming that the merchant’s website meets all requirements, otherwise a conditional approval may be granted until the website is fully setup. The total setup time is around 3 – 4 days.
Wireless processing businesses:
Wireless businesses are considered the same as a retail business except the terminal will take an extra 1 – 2 days to setup the terminal on the wireless network. The total time to be setup is 5 – 6 days.
These times do not include any pending issues or the requesting of additional information, which is uncommon but does happen for some applications.
Do I need to have excellent credit to get approved?
Personal and business credit are factors that are used to qualify a business or individual for a merchant account. Every merchant account application will include a credit check of the business and the person signing for the merchant account. Perfect credit is not a requirement for opening a merchant account, but a better credit rating can help speed up the application process. The only time that credit becomes an issue when opening a merchant account, is if a merchant has an open bankruptcy, or has been terminated from processing in the past.
Our company processes through five domestic processing banks which enables us to provide services to nearly any business, regardless of past credit history.
What is AVS (Address Verification System)?
The address verification system or AVS is an electronic system that verifies the address of the card holder during a credit card transaction. This system is commonly used in internet based and keyed in transactions where the card is not being swiped through a credit card machine. This system can verify the billing zip code of the card holder and if setup properly can verify the street address and sometimes even the telephone number. The merchant gets a response that the AVS is approved or declined and can then chose to run the transaction or not.
AVS should always be used for every internet and keyed transaction to avoid downgrade charges and fraud. Even if you can verify who your customer is, if you are setup as a keyed or internet account, you should use AVS for every transaction.
What is CVV, Card Verification Code?
CVV is a card verification system that verifies that a cardholder is in possession of a credit card by verifying a set of numbers that is embossed on the credit card and not encoded in the magnetic strip. This way even if the card number is stolen, a transaction cannot be processed if the purchaser cannot verify the CVV number on the card.
Requiring CVV in addition to AVS can help to eliminate most fraudulent orders for internet and keyed entry businesses.
Each card issuer has a different name for the CVV system, but all are essentially the same thing. Visa refers to it as CVV2, Mastercard is called CVC2, Amex is CID.
The CVV number is located on the back of the card except for most Amex cards where it is on the front. Amex also uses a 4-digit verification code whereas all other card makers use a 3-digit number.
Can I process on my website?
We offer several options that will allow you to process credit cards through your website. These services will integrate with your website to allow real time transaction processing, and include a virtual terminal that will allow you to manually process transactions through a secure website.
Payment Gateway and Virtual Terminal Options:
- Authorize.net
- PayTrace
- Verisign Payflow Link
- Verisign Payflow Pro
If you are interested in adding a credit card acceptance option to your website, please give us a call.
Is wireless coverage available in my area? Do you live in a rural area?
If you answered this question as yes, then there is most likely no coverage in your area. The wireless processing networks do not use the normal cell phone networks, and are subject to extreme blackout areas. Most cities have adequate coverage, but rural areas do not.
The TDMA and GSM networks are not yet certified for wireless processing, but will be in the future. This will greatly open up wireless processing for the rest of the country. There are already several wireless terminals that can process on these networks as soon as the networks become available.
Wireless processing is now available on the GPRS Edge Network from Cingular. The terminal that we offer that works with the GPRS Edge network is the Nurit 8000 wireless terminal. Below is the GPRS Edge coverage map. Wireless processing coverage is the dark blue.
Should I purchase or lease equipment?
If you can afford to pay up front for the equipment that you are looking to obtain, you should do it. Purchasing will save you a considerable amount over leasing.
These are a sample of the difference in price between leasing and purchasing. These prices do not necessarily reflect exact leasing rates, but will compare the low end industry standard lease price to the purchase price.
Lease vs. Purchase – FD55 (Dial & High Speed)
Price to Lease FD55: Price to Purchase FD55:
48 Month Lease
$19.95 / month Flat Purchase
$199.00 / One Time
48 x $19.95 = $957.60
Total = $957.60 and a 48-month contract. Total = $199.00 and no contract.
Total savings if terminal is purchased: $758.60
Lease vs. Purchase – VeriFone Vx510 (Dial & High Speed)
Price to Lease Hypercom T4205: Price to Purchase Hypercom T4205:
48 Month Lease
$34.95 / month Flat Purchase
$293.00 / One Time
48 x $34.95 = $1677.60
Total = $1677.60 and a 48-month contract Total = $293.00 and no contract
Total savings if terminal is purchased: $1384.60
These lease rates reflect the low end of what is charged to merchants out there.
The bottom line is that even if a lease sounds like a good deal you will still spend much more than if you outright purchase the equipment. Most leases are non-cancelable, and may or may not include a buyout option at the end where you will be required to pay a percentage of the cost of the terminal. We have seen merchants using other companies with a buyout option of the total cost of the terminal that they are leasing.
** We do not lease or rent terminals, and would encourage you to purchase the terminal out-right before ever getting into a lease agreement. They are virtually impossible to get out of! **
Can I buy a terminal from another company?
Absolutely.
We can reprogram most any terminal being used in the processing industry, and we won’t charge you anything to reprogram it. If you find a better price on a terminal from a reputable reseller we encourage you to save money. We try to keep our prices the lowest anywhere, but exclusive offers sometimes come around. Also keep in mind that we will not warranty any terminal that is not purchased from us. You will still be entitled to all our customer service benefits, but if a problem arises with your equipment, you will need to refer to the manufacturer for warranty and service issues.
Can I buy equipment on eBay?
Yes and No.
You can often find excellent deals on eBay for terminals or other processing equipment, but many times these terminals are defective or have other obligations attached to them.
Terminals on eBay often include merchant account requirements before the terminal will ever be shipped. These companies usually offer impossibly low rates and will raise these rates after you are committed to their services.
Many times, defective or outdated terminals are sold at low prices on eBay to the unsuspecting buyer. The most common terminals that are sold to fool the buyer are Verifone series and Nurit 3010 terminals. The VeriFone terminals are outdated and are unusable on most processing platforms. The Nurit 3010 has a version that cannot be used on any processing platform, because of the outdated wireless network called the CDPD network. These terminals are usually sold with no return policy so once the purchase is made, the buyer is left with a useless terminal. We see merchants on a weekly basis that have been scammed by these eBay bargain terminals. There is nothing that we can do except offering a certified terminal with a full warranty.
Unless the terminal is from a reputable seller and includes at least the manufacturer’s warranty, don’t buy the terminal. If you aren’t willing to take the risk of losing your money on a terminal that doesn’t work, just stay away from eBay terminals.
The benefit of ordering a certified terminal from us, is that all terminals are either new or factory refurbished. If you choose a Refurbished terminal, they are properly marked to ensure you know you are purchasing a refurbished terminal.
What is a chargeback?
A chargeback is where a customer is disputing a charge listed on their credit card statement. A chargeback may get the customer their money refunded, but it is not a refund. Avoid chargebacks at all costs because they can ultimately end up in a merchant losing the ability to process credit cards completely.
The customer will contact their credit card issuing bank to notify them that they want to dispute a charge. The card issuing bank requests a chargeback from the processor who takes the amount of the purchase from the merchant’s bank account. The merchant will then be sent a letter that notifies them of the chargeback and requests further information from the merchant. The merchant will need to provide the requested information to the processor who will then decide on whether the customer deserves to get a refund.
Chargebacks can be initiated for a variety of reasons. The most common reason is that a customer doesn’t recognize or doesn’t remember the name of a merchant listed on their credit card statement.
A chargeback can be initiated 6 months after the completion of the sale. This means that if you provide a service that lasts 1 year the customer can chargeback the transaction 6 months after the service is completed, one and a half years after the sale itself is made. This is why chargebacks are more common with long term or custom services.
Common Chargeback Reasons:
- Not recognizing merchant’s name on credit card statement.
- Customer charged more than once for the same purchase.
- Merchant did not deliver the agreed upon service.
- Customer unsatisfied with product or service.
- Fraudulent orders (mainly internet businesses).
The best way to challenge a chargeback is to first contact the merchant to try and figure out why there was a chargeback. Many times, the merchant will withdraw the chargeback. Other times the merchant only asked their bank if they knew what the charge was, and the bank initiated the chargeback without the merchant even knowing. Next, get the required paperwork together and send it to the processor. This information must reach the processor within 10 days of receiving the chargeback letter. The required documents will be listed on the chargeback letter. It is important to cooperate fully with the processor to resolve the chargeback. Remember, it is not the processor that is issuing the chargeback, it is the card issuing bank or the customer. Getting angry at the processor, who is trying to help your business, will only further complicate the process.
You may not win every chargeback and your business may never get a chargeback, but operating your business under good standards and having good customer relations will improve your chances of not getting a chargeback in the first place. Also make sure your customers know your business name and return and refund policies, to avoid simple misunderstandings.
How long does it take for funds to be transferred?
Funds will be available in your bank account normally between 24 to 48 business hours from the time that a batch is received by the processing bank. It is a common misconception that funds will be available 24 to 48 hours after a transaction, but this time is actually measured from the time of the batch.
Once a batch is received by the processing bank, the funds transfer is initiated. The funds are withdrawn from the customer’s account almost immediately, and the merchant’s bank will hold the funds for 24 to 48 hours until the transfer is finalized. This wait period is also a fraud prevention measure. Sometimes a merchant’s bank will have a policy to hold the funds for longer than 48 hours. There is nothing that the processor can do to speed up the transaction. If this delay is a problem, the merchant should talk to the bank and see if they can stop the transfer hold. If they cannot, the merchant should find a new bank for their checking account. Changing processing companies will do nothing to help eliminate this delay in the funds transfer.
When transactions are processed on the weekend or holiday, the funds will take extra time for the transfer. The banking systems are closed on the weekends, which causes the delay. Again, changing processing companies will not speed up the transfer of funds for transactions processed on the weekend or on holidays.
When certain conditions are met by the merchant to batch out before the cut-off times, usually 4PM EST then next morning funds may be possible. Cut-off times vary depending on the network you are processing on.