Globally, July 1st, 2010 marked the deadline for all transactions originating at the point-of-sale (POS), Pin-entry device (PED) must be encrypting PIN’s using Triple Data Encryption Standard (TDES) from the point of transaction to the issuer (end-to-end).
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Common Merchant Account Misconceptions
By Emily Shap
There are many misconceptions out there regarding merchant accounts. Sometimes these misconceptions arise because a business owner does not fully understand their account, or many times merchant account misconceptions are simply passed on by word of mouth. Here is a look at some common merchant account misunderstandings and how you can overcome them.
Merchant Providers Hide Fees
By law, Merchant Account Providers must disclose all merchant account fees and rates to the merchant. These rates and fees may not always be easy to read when they are part of a 25-page contract, but they are there. Take the time to read every page of your merchant account agreement contract. Ensure you understand all the fees and rates listed. If you have any questions, ask your provider. They should be more than willing to go over their pricing with you.
Many merchants seem to think that when their contract term is up with their current merchant account provider, that their agreement automatically goes month-to-month. This may not be the case. In most instances, when a merchant account contract expires and there is no new agreement drawn up, the original contract term is reinstated. Ask your current merchant account provider what their contact term policies are. As your contract term end dates nears, take the time to speak with your provider and update any changes to your account (volume, average ticket, etc.). This is also a good time to negotiate pricing.
Credit and Debit Swiped Rates are the same
Don’t be fooled when looking at those low qualified rates you see advertised. Those low rates are most likely the debit-swiped rate. Credit card swiped rates are higher than PIN-based swiped debit transactions. When comparing rates or negotiating with your current merchant account provider, ask to have both rates quoted to you.
Free Equipment to Keep
Credit card terminals, printers, and pin-pads that are offered to a merchant for free are most likely not for the merchant to keep. Free equipment is “loaned” to the merchant while the merchant maintains an agreement with the provider. Once the merchant account agreement is terminated (by either the merchant or provider) the free equipment must be returned to the provider. Failure to do so could result in the provider recouping their equipment cost directly from the merchant’s credit card funds.
Merchant account agreements have a lot of information, which can overwhelm and confuse the best of us. Information may be different with each provider or source. In fact, most business owners learn the merchant account ropes through experience. But by reading the agreement and asking questions, merchants can avoid account misconceptions.
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Choosing a Merchant Services Provider does not have to be a daunting task. By asking a few imperative questions you will have a better understanding of their business and if they are a right fit for you.
- Question #1 Customer Service… Ask your prospect what you can expect when you call their office for support. Who will answer the phone? Do they have one of those annoying automated system that takes you into a black hole, or do they have a live human answering the phone? What are the hours of operation? If you speak another language, do they have a translation service? If you have an emergency, is there a 24 hour telephone number?
- Question #2 Rate…You should not base your decision solely on price. Be weary of those that are offering extremly low rates. They may be padding the back end with additional fees. Qualified and non-qualified rates are determined by Visa/MasterCard. Look at their websites to determine what these credit card companies are charging your processor to run Visa/MasterCard transactions. If the rate is lower than this “set” rate, be cautious. Remember that your processor is a business, with expenses and employees to pay.
- Question #3 Funding…How long will it take for your e-funds (funds from credit, debit, and e-checks) to be deposited into your bank account? The deposit, or funding time is different with each processor. If your business needs daily cash flow to pay employees funding time could be very important to you. Processors fund anywhere from 24 hours to several days to even weeks.
- Question #4 Experience…How many years has the processor been in business? This can prove to be very important when a problem arises with your account or your equipment. Ensure they have the know-how to get things resolved, and fast!
- Question #5 Equipment…Long gone are the days of having to purchase costly equipment, or get stuck in a long lease. Leading processors are offering free equipement with new, approved merchant accounts. Understand that this is a free terminal placement while you are a current client of the processor. If you terminate the agreement, for any reason, you must return the equipment. Be cautious about processors who push new, costly, equipment. Unless you current equipment is not PCI compliant or network compliant, you should not have to upgrade.
- Question #6 Contract Term…Know if there is a contract term. If there is a contract term and you want to cancel the contract in the future what is the fee. Are there certain exceptions to this early-cancellation fee?
- Be honest with your processor about your business type, how much you process, and the average ticket amount. Don’t claim a $20.00 average ticket amount when your average ticket is around $200.00. This may see like a good idea to qualify for a “lower” rate but what will undoubtly happen is..after you run a few “abnormal” transactions, a red flag will go up at the risk department. They are looking for fraud. If your account has abnormal activity that might be fraudulent, they will freeze your account to minimize their exposure. Your account will be held until an investigation is completed. This can take months. Be honest and up front with your credit card processor to eliminate this hassle all together.
- Ask Questions. Be studious. Look at all contracts, reall all the lines. Your processor cant realistically go over everything. It is your job to look the contract over and ask any questions you might have. Be weary of processors who are quick to get your signed without addressing all of your concerns.
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