Is it difficult to get a merchant account?

In order to set up their credit card processing service, businesses need to go through a strict application process (we try to make it as simple as possible, but we can only go so far). Sometimes it may seam as if the credit card processing companies are being excessively demanding but they have to follow certain regulations, introduced by the Credit Card Associations (Visa and MasterCard) and their member banks. Establishing a business merchant account is not necessarily a difficult process but it may be delayed by every small omission in the application form. You will be asked to produce the following documents:

• Sole proprietors - your tax returns for the last two years.
• Corporations - your financial statements for the last two years.
• A voided check for the bank account where you want your funds to be deposited.
• If you are switching credit card payment processing providers you will have to submit your processing statements for the last three months.

In addition you will have to submit your personal information, including your SSN, and to personally guarantee your credit card processing account. Small business merchant accounts come in many shapes and forms and you may be asked for additional paperwork as well.

Be advised that if your business falls into a high-risk category, you will need a high-risk merchant account provider as not every processor will be willing to work with you. There are however certain business categories for which no US bank will underwrite a merchant account processing service. Prime examples are adult-oriented websites, third-party collection agencies, online gambling sites, etc. If you operate such a business, you will need to look for an offshore solution or a third-party processor.

Selecting a Merchant Account Provider

There are many credit card processing companies out there and selecting the one that will offer the best solution to your needs can be challenging, to say the least. There are several factors to consider when choosing a small business merchant accounts provider, whether you are looking for a virtual, physical or a manual credit card processing solution. First and foremost, you want to be sure that you don't get overcharged. The payment processing cost consists of several components and you need to know exactly how much you will be paying for each one of them:

• Discount rate - the amount a merchant is charged by his acquirer for processing the merchant’s transactions. It consists of a percentage fee (e.g. 2.25%) and a fixed, per transaction, charge (e.g. $0.25). For an internet or direct marketing account it should be no more than 2.20% + $0.25 per transaction. For Retail accounts it should be no more than 1.70% + $0.25 per transaction.


• Authorization fee - another "per-transaction" fee. You should not pay more than $0.12 for any type.


• Application and set up fee - one-time fees to apply for and set up your credit card processing service. You should NOT pay ANY set up or application fees!


• Monthly maintenance fee - as the name suggests, it is charged monthly to keep your account on file. You should not be paying more than $10.


• Support fee - another monthly charged for customer service. You should not pay any such fees.


• Payment gateway fee - specific to the eCommerce industry. An eCommerce payment gateway is the service that connects your website with your processing bank and transmits transaction information between them. You will only need it if you want to let customers pay you over the web and it should not cost you more than $15 per month.

If you see any other charges for your merchant services credit card processing account, you will be well advised to look elsewhere. Also, when evaluating a new credit card processing service proposal, your prospective processors should provide you with comparison tables to make your choice a better informed one.

Other important factors you need to consider when selecting a merchant services provider are:

• Experience - this can be a double-edged sword. On the one hand, you want to be sure that your processor will have the expertise to get the job done. On the other hand, many well established card processing companies offer substantially higher rates, justifying it exactly with their long record and the piece of mine that it brings you. You should not be overpaying just because they've been in business for a while.


• Customer support - you will want to make sure that you will be getting knowledgeable support when you need it, because you will need it.


• Chargeback management - chargebacks result when customers dispute transactions and can be costly and time consuming. In extreme cases, you may even lose your business merchant account. You will want to make sure that your merchant account provider has the expertise to help you reduce the level of chargeback-generating disputes. We have developed our Payment Card Acceptance Best Practices Guide to do just that.

There are other factors as well and you will need to do you complete due diligence, as selecting the right merchant payment services company will reduce your processing costs and help grow your business.

You can review our latest pricing here.

Regular Merchant Account vs Third-Party Processors

There are many things to consider when evaluating your payment card processing options. There are no universal solutions that would be perfect for everyone. When it comes to a choice between a direct merchant account and a third-party processor, there are several factors that come into play.

First of all, one thing should be made clear - third-party payment processing rates are substantially higher than a direct merchant account's. So the question is, if that is the case, why would anyone want to subscribe for a third-party solution? Usually the answer is very simple - because a merchant account is not an option. This is the case when any one of the following is true:

• Your credit is exceptionally bad. A bankruptcy less than 7 years prior to the application is a good example.


• You don't have a registered business. A direct merchant account cannot be opened under a personal name.


• You have been blacklisted by the Associations (Visa and MasterCard). If you have been included in the Terminated Merchants list, you will never be able to open a merchant account service again.


• Your business operates in a very high-risk area. Some businesses tend to generate higher levels of chargebacks (disputed transactions) and process credit cards at higher rates. There are several groups that are so high risk that US banks will not underwrite their payment processing accounts. Prime examples are adult-oriented websites, online gambling establishments, third-party collection agencies, etc.


• You process low credit card volumes. Card payment processing services come with certain fixed costs which are due whether you use the account or not. You will be paying a monthly statement fee (or an equivalent) and an eCommerce gateway fee and maybe other fees as well. These fees are not usually associated with third-party processing services where you simply pay as you go. So if you will only process one or two small volume transactions per day, you will need to do the math and see if a dedicated card processing account is the way to go or you should outsource the service.

There are of course a few other factors to consider but these are the main ones. If you process sufficiently large volumes and meet the other criteria, your best option is your own business merchant account. It gives you complete control over your card payment processing and a more professional image.

How can you accept payments outside of your office?

Today's technology allows payments to be accepted at your customer's location or anywhere else outside of your office through a wireless merchant account. There are two types of wireless service - long- and short-range. The long-range solution relies on network connectivity and is ideal for those of you who will be processing credit card transactions at different locations outside of your office, but on your premises. The short-range service comes with a main terminal, which is connected to a phone line, but the wireless device can be operated within a radius of a few hundred feet. With both solutions transactions will be processed quickly and securely. What you need to make sure is that you have network connectivity in the area where you will be using the device and that is actually the biggest issue with wireless credit card processing. These devices use the same technology that cell phones use to transmit information and are affected by the same limitations.

Another potential issue is cost. Mobile credit card processing devices are pricier than regular terminals and you will need to account for that premium when considering the service. On the other hand, using a wireless merchant account will reduce your processing costs. Because you will accept credit card payments in person and the card will be swiped through a terminal, you will be eligible for receiving the lowest processing rates, reserved for face-to-face merchants. If you have to key in the transaction information afterwards, you will pay the higher rates.

On balance, a wireless credit card processing account is the best solution for businesses that routinely accept credit card orders in a mobile environment. If such payments are more of an exception, you might be better off using the old-fashioned payment slips for now.

Do merchant account providers check applicants' personal credit?

Yes, merchant account providers check every applicant’s personal credit history, however, your bad credit should not prevent you from getting processing services.

First of all, let me strongly advise you against adding a co-owner exclusively for the purpose of using his or her credit history during the application process. It will create more problems than it will solve. The first issue has to do with trust and for most people adding a relative or a close friend takes care of that. But what happens if something goes wrong? Unfortunately, in business things can and do go wrong more often than not and a co-owner is fully responsible for everything that happens. The potential of harming your relationship with a trusted friend/relative is enormous.

My advice is to apply for a merchant account and provide all required information. Unless you’ve had a bankruptcy during the last seven years, you should be able to obtain payment processing services. Keep in mind that, with the right processing provider, your bad credit will not affect your rates. As long as you get approved, you should get the same rates anyone else gets. The difference in your case is that you may be required to keep a reserve. Reserve is a portion of the monthly revenue from a merchant’s payment card transactions that a merchant account provider may request to hold in an escrow account as an insurance against possible loss from chargebacks and other sources. Used mainly with high-risk merchants, upon satisfactory completion of a predetermined period, reserves are returned to the merchants. In the case of a rolling reserve, a reserve is held every month for a certain period (usually six months). On the following month the first month’s reserve is released to the merchant, and then the second month’s reserve and so on until there is no longer a reserve.

To conclude, your situation is by no means desperate and does not call for desperate measures. Go ahead with the application and it might turn out that it is much easier than you feared.

What questions should I ask when calling about a MO/TO merchant account?

There are many things you need to know when selecting a payment processing services provider. The most important issue is the payment processing costs - you certainly don't want to be overcharged. The costs are comprised of various fees and charges and I have given you a breakdown below.

• Discount rate - the amount a merchant is charged by his acquirer for processing the merchant’s transactions. It consists of a percentage fee (e.g. 2.19%) and a fixed, per transaction, fee (e.g. $0.25). You should not agree to anything higher than 2.19% + $0.25.


• Authorization fee - another "per-transaction" fee. You should not pay more than $0.12.


• Application and set up fee - one-time fees to apply for and set up your merchant account. You should NOT pay ANY set up or application fees!


• Monthly maintenance fee - as the name suggests, it is charged monthly to keep your account on file. You should not be paying more than $10.


• Support fee - another monthly charged for customer service. You should NOT pay ANY such fees.


• Virtual terminal fee - a virtual terminal is the application that you will open in your browser and enter the payment information as you are taking it over the phone or getting it from a form you got in the mail. It should be provided for free.


• Payment gateway fee - an eCommerce payment gateway is the service that connects your website with your processing bank and transmits transaction information between them. You will only need it if you want to let customers pay you over the web and it should not cost you more than $15 per month.

As you can see, there are many rates to consider and this is just the beginning. Merchant account rates are only as good as your ability to process transactions in a way that is compliant with Visa and MasterCard regulations. If they are not, transactions are downgraded to "non-qualified" and processed at a substantially higher rate (on average about a full 1% higher). It is your merchant account provider's responsibility to help you get a grasp of these regulations and ensure compliance.

Is a merchant's license required to sell over the internet from your own website?

Requirements vary by state and the best thing to do is to check with your secretary of state. Different states may or may not require a license for a particular type of business. A great resource is the U.S. Small Business Administration website. It has a lot of useful information different laws and regulations, as well as opportunities. For licenses and permits you can check here: http://business.gov/guides/licenses_and_permits/. Just scroll down and locate your state. It even allows you to search by ZIP code.

How can an international charity accept credit card payments?

To accept payments online in the US, for both commercial and non-profit entities, you will need either your own merchant account or a third-party payment processor.

Having your own merchant account will provide the lowest payment acceptance rates - currently no more than 2.19% + $0.25 per transaction. In order to set up your own merchant account in the US, you will need your organization to have a legal presence here. In other words you will need at least a subsidiary to be registered in the US and to have a bank account and address here.

If that is not an option, you can open an offshore merchant account, which will allow you to accept payments in the US, but at substantially higher rates - 5% - 6% or more per transaction. The upside is that you can set it up without having to incorporate in the US. To locate offshore merchant account providers, simply Google "offshore merchant account providers".

The third option is a third-party provider like PayPal and they will not be cheap either. You can visit their pricing page and see if you can find your rate. It might be lower than an offshore merchant account but the downside is that they tend to overprotect and freeze accounts for no good reason.

Why are some businesses more high-risk than others?

In the world of payment processing, the Credit Card Associations of Visa and MasterCard make all the rules. Banks have to be members of the Card Associations in order to issue credit cards or acquire card transactions.

When it comes to risk assessment, Visa and MasterCard rely mostly on historical data. The biggest component of their risk evaluation toolkit is the probability of generating chargebacks. A chargeback results when a cardholder disputes the validity of a transaction, posted on his or her statement. The dispute sets in motion a validation process, which is illustrated in our diagram and involves all of the participants. The cardholder has to file an official dispute with his or her card issuing bank, who then returns the transaction to the merchant bank, through the Card Associations. At this point the merchant bank can either resolve the dispute, or, if they need additional information, they will contact their merchant and ask for a proof that the transaction is valid (a receipt would answer just fine). The merchant will then provide (represent) that proof, if available, and the representation will find its way through the chain back to the card issuer and their cardholder, thus resolving the dispute. Now, whether the dispute is valid or not, it generates a certain amount of expenses that the Associations will have to incur. That is the main reason for the premium high-risk businesses have to pay on their processing rates.

Naturally, businesses that transact in a non face-to-face environment, tend to generate higher levels of chargebacks. Web-based and direct marketing merchants are automatically included. Higher average tickets add an additional amount of risk, due to the larger amounts that are moved around and the resulting higher transaction fees that are generated. New merchants too add to the risk, due to their limited processing experience. There are other factors as well which can lead to some businesses being completely unacceptable to US-based merchant services providers. For example gambling websites are extremely risky, simply because cardholders may feel like victims and dispute a charge, even if the gambling site played by the rules. Adult-oriented websites, on the other hand, are prone to generating higher levels of chargebacks, because customers may be uncomfortable to admit using their services, even if they have.

The Associations require payment processors to closely monitor their merchants' chargeback levels. Processors get penalized if their merchants' chargeback levels exceed certain limits and, in extreme cases, merchant accounts can be suspended.

UniBul Merchant Services Launches New Website

UniBul Merchant Services posted a new press release today. Text below.

UniBul Merchant Services Launches New Website

UniBul Merchant Services, a provider of credit card processing services to US-based businesses, announces the launch of its new website.

Boston, MA – UniBul Merchant Services announced today the launch of its completely redesigned website - https://www.unibulmerchantservices.com. Its main goal is to help educate US-based merchants on the basics of credit card processing, explain what payment processing costs consist of and offer concrete, customized payment solutions.

The visually pleasing design features an embedded Flash introduction video, which can only be played if the visitor elects to. A conscious effort has been made to stay away from flashy signs and oversize action buttons to ensure a relaxed experience for all visitors.

New merchants looking for payment acceptance capabilities and established businesses in search for better alternatives to the solution they currently have, will find it very easy to locate the information they are looking for. From the home page they can easily navigate to review the card processing basics, processing rates, fraud protection tools, chargeback management solutions, gift card programs and frequently asked questions.

A special emphasis has been given to the educational side of the website. At the Card Processing Basics page, visitors will find a detailed description of the stages every card transaction goes through. A diagram has been added for better understanding. Merchants can clearly see all parties involved in the process and how and when they transact with one another. At the Chargeback Management page, visitors will find a diagram, representing the chargeback cycle, a description of the process and an explanation of the causes and potential remedies that can be implemented. A list of manuals and available tools for chargeback management is included as an additional resource.

One of the most important additions to the website is the new Payment Card Acceptance Best Practices Guide. It is developed to help online merchants process transactions in a way that is compliant with the latest industry regulations for protecting cardholders’ personal information and verification of the validity of transactions. It includes a thorough examination of the new MasterCard and Visa regulations on gathering, storing and managing sensitive personal information when processing credit and debit card payments. It offers concrete steps businesses need to take to be in compliance and to ensure lowest transaction costs as a result.

Included in the sidebar of the website is a link to UniBul Merchant Services’ new Facebook page. All visitors are encouraged to visit and share their experiences as customers, make suggestions, give advice or just hang out.

The newly redesigned website is a big step forward for the young payment processing provider. The fresh look and professional touch are sure to attract positive feedback and, as the management hopes, more new customers.

UniBul Merchant Services is a Boston, MA-based Independent Sales Organization (ISO), registered with Visa and MasterCard as a provider of payment processing services for US businesses.

Contact:
UniBul Merchant Services
617-861-6101
https://www.unibulmerchantservices.com