Archive for August, 2025

When establishing a new merchant account, especially if it is your first merchant account, it is important to verify that your account is established properly. Although mistakes and errors are rare they do occur. A small mistake such as an extra 1¢ per transaction can add up to thousands of dollars over time.

What To Look For

1. Your Rates Are As Quoted During the Sales Process

   Dishonesty amongst sales agents are an unfortunate problem in the merchant services industry. Rates are often quoted in such a fashion as to mislead merchants as to what their rates will truly be when they accept credit card payments. Errors are also possible as applications are manually entered by human beings (and we are flawed creatures, are we not)? A simple typo can change your transaction fee from 20¢ to $20! Your rates should be displayed prominently on your processing statements and should match what was on your contract. If not, this is a good time to question your new merchant account provider.

2. Hidden Fees/Undisclosed Fees

   Before you go looking for every little fee you see on your statement that does not make sense, keep in mind that there are a lot of potential fees associated with accepting credit cards. Your sales agent will not be able to, nor should they really have to, tell you about all of them. But, they should tell you about all of the fees the expect you to possibly see based on the information you told them during the discovery phase of the sales process. If they did a good job of learning about your business they should have covered all of the common and most of the not-so-common fees you will see on your statement. But if you are seeing large fees being applied to your sales, either you were not properly informed of that fee, or you need to be trained better in using your merchant account.

One thing to keep in mind when reviewing your statement is that if there is an error you must deal with it right away. Most processors will only allow a merchant to correct errors during the 30-day period following the billing period. If you wait until your next statement arrives to confirm the problem it might only be too late. The processor will take your silence as an acceptance of the error and will not refund any fees that you are owed.

Always be sure to read your statement when it arrives and contact your processor immediately if you have any questions or believe there is an error.

Address Verification (AVS for short) is an essential security measure for online merchants as well as mail order/telephone order businesses. (Read the blog entry The AVS Game to learn more about AVS). It is a useful indicator of potential fraud and can save you money by not only preventing chargebacks, but allowing you to stop the transaction from even occurring in the first place. The Authorize.net payment gateway includes a setting where a store owner can automatically decline a sale if AVS doesn’t match. (You can even have Authorize.net reject sales that CVV2 does not match as well).

But do you always want to decline a transaction just because it failed AVS? Let’s look at what AVS is supposed to accomplish as it will provide us some insight into how it should be used. AVS compares the address provided by the customer against the address their card-issuing bank has on file. The level of AVS provided depends on the credit card terminal but it always includes verifying the customer’s zip code. All modern equipment and software also verifies the street address as well.

So where does the problem come in? The address the customer’s card-issuing bank has on file is the billing address for the customer. This is not necessarily their physical address or their shipping address. For example, many people like to us P.O. Boxes to receive their mail to help protect against identity theft. These people will have a billing address that resembles P.O. Box 123, Townsville, NY 12345. But their physical address may be 1000 Main Street, Othertown, NY 12346. To complicate it more, they may want to have their order shipped to their place of employment because no one will be home to receive their delivery during business hours. That address may be 5983 Corporate Drive, Big City, NY 12383. When placing an order this customer may supply their work address as their address to be sure it is sent to their work where they can be sure to receive it. But when AVS is performed on their transaction it will fail. Other scenarios where AVS might fail would be if someone has just moved or maintains two residences.

So what value does AVS offer a merchant? A positive match is always a good sign (although it surely doesn’t mean a sale is free fraud potential fraud). A negative match is still useful as well. When you see a negative match for AVS it is a good time to pick up the telephone to call the customer. If you get through ask them about their order and ask about their address. This usually is enough to verify the sale is legitimate and you can proceed to ship your product. It will even make the customer feel warm and fuzzy that you are a legitimate and thorough business. If the number is never answered or is disconnected then the sale has a high probability that it is fraudulent and you can void it out completely. Other warning signs for fraud can also be used to determine if a sale is fraudulent. Read the article The Chargeback Challenge to learn more.

First let us define a seasonal business. A seasonal business is only open for a specified period each year. This period is consistent and does not change from year to year. For example, a Christmas decoration store will be open every year from October through December. They will not be open for business from January through September.

Typical seasonal businesses include:

• Landscapers
• Fireworks sales
• Christmas/Holiday-based
• Some trade show merchants

With a seasonal merchant account seasonal businesses can have their merchant accounts closed for the months each year during which their business will be closed. During this period of time their will incur no merchant account related fees including their monthly service charge. Typically a seasonal business will indicate they wish to be considered seasonal during the application process and list the months they plan to be open. An important thing to remember is that having a seasonal merchant account does not mean you can open and close your merchant account at random times.

Having a seasonal merchant account should not cost you anything and is widely supported by most merchant account providers.

A common questions amongst new online merchants is where do you get your payment gateway from? Do you go straight to Authorize.net? Or do you get it from your merchant account provider?

You typically will get both in one place but this is not necessarily how it has to be done. Authorize.net can only be established through resellers and most resellers are also merchant account providers. So, you will find that whatever merchant account provider you chose will most likely also be able to establish your Authorize.net gateway for you. This way is the most common and the easies way to do it.

However, it is possible that you can get your payment gateway from one provider and merchant account from another. But you will find besides the fact that this is more work for you, you will also run into resistance from Authorize.net resellers and merchant account providers who want to sell you both services and not have another provider taking “a piece of the pie”. It is best to get both services from the same provider as the pricing for an Authorize.net gateway is virtually the same from most of their resellers.

So you have three, or more, websites that you wish to accept credit card payments through. You want one merchant account for all of them to share. It seems easier to manage and surely cheaper. But can you do it?

No serious merchant account provider is going to establish one merchant account for multiple websites. The chargeback potential is too enormous to do so. The fact that only one website will have the proper name shown on the other two statements means that the two that don’t have their name on the customer’s statement will experience a high rate of chargebacks just from customers not recognizing the DBA on their statement. This doesn’t even take into consideration the high rate of chargebacks internet-based businesses experience anyway.

And, if you want to try to avoid that by putting the corporate name on the statement you make the problem even worse. Now all the website’s customers will not recognize the DBA on the statement. You might think you can put the corporate name prominently on each website or saying on the checkout page, “Your statement will say XYZ Corporation” will mitigate that problem. Not true. Customers associate the DBA with their purchase and having the wrong name on the statement is a proven way to get lots of chargebacks.

The bank, and the merchant, will want to have three accounts as if one experiences a high rate of chargebacks (> 1%) that account will be closed but the other two are unaffected. If the three accounts are rolled up into one, if the chargebacks from one get too high and bring the collective total over 1% they all are shut down. Obviously bad business for the merchant.

Also, that $1,000 mark that is commonly used to decide when to consider getting a true merchant vs a third party processor is a myth. Paypal is actually always lower then the average merchant account at any volume. (You can verify that by using the calculator included in the article). Their tiered pricing based on monthly volume is structured in such a way that only a better-then-average merchant account rate structure will beat it outright. The real reason why someone doing more then $1,000 per month or more would want a true merchant account is the other benefits of a true merchant offers like your own business name on your customers’ statements and a transparent checkout.