Merchant Account Services

Archive for the 'Merchant Accounts' Category

New Article: Merchant Accounts 101

Wednesday, March 19th, 2008

A new article has been published today that we are very excited about. Merchant Accounts 101 covers the ins and outs of merchant accounts.

Covered in this article are:

  • The Players

    Find out who’s who in the merchant account business. We start at the top with the big card associations and work our way down to the sales agent who establishes your account.

  • Types of Accounts, Credit Cards, and Transactions

    Before you can begin to understand what fees you will incur by accepting credit cards you have to understand the environment in which you are accepting them. Learn how your style of business, type of transaction, and type of credit card affect the fees you pay with every transaction.

  • Processing Fees

    The fees associated with accepting credit cards is the first thing most merchants think of when they think of a merchant account. And yet most merchants do not understand exactly what they mean or how to determine which plan is the best for them. We explain what the fees are that will be charged for each transaction and how to determine what rate structure is the best for your business.

  • Surcharges

    Ever wonder why some credit card transactions cost so much more then others? Ever wonder why all of the transactions your process are not at the rate your sales agent quoted you? This is because surcharges may apply to your transaction. We explain why surcharges may occur and how much they may affect your rates.

  • Monthly Fees, Annual Fees, and Other Fees

    It seems everything a merchant does incurs a fee from their merchant account. We outline and explain the most common ones and let you know which ones should not be there most of the time.

  • Establishing a Merchant Account

    Once you understand your rates and have chosen a merchant account provider you need to begin the processing of establishing your account. We detail the aspects of this and what you need to be aware of to ensure a quick and easy process.

  • Security and Risk

    The first thing a merchant thinks of when they think about risk is fraud. Merchant account providers think even deeper then that and that can have a profound effect on your processing experience. We’ll explain the various factors surrounding security and risk with merchant accounts so you don’t have to worry about your money being in limbo.

  • Getting Started

    Once your merchant account is established your responsibilities as a merchant are not over. You still need to verify your merchant account was established properly. We’ll outline what you need to do to make sure your new merchant account stays hassle free for the lifetime of the account.

So read our article Merchant Accounts 101 and let us know what you think about it in our Merchant Account Forums.

Amazon Launches Payment System – Amazon Flexible Payments Service

Tuesday, August 7th, 2007

Amazon.com recently announced that they are entering the merchant services arena by offering their own in house payment system. Called Amazon Flexible Payments Service, or Amazon FPS for short, it is designed to be a direct competitor of Paypal and Google Checkout. An advantage it potentially offers over Google Checkout is through Amazon.com’s huge database of customers it already has billing information on file for a large portion of their potential user base. This can mean a quick and easy checkout. Unfortunately, like Google Checkout, your customer will need to go to the Amazon.com website to make payment.

Some of the features they offer include:

  • Accept payments three different ways:
    • Credit Card
    • ACH
    • Amazon Payments balance transfer
  • Accept one time, multiple, and recurring payments

The fee structure is very similar to Paypal and is listed below:

  • For Transactions >= $10:
    • 1.5% + 1¢ for Amazon Payments balance transfers
    • 2.0% + 5¢ for bank account debits
    • 2.9% + 30¢ for credit card
  • For Transactions < $10:
    • 1.5% + 1¢ for Amazon Payments balance transfers
    • 2.0% + 5¢ for bank account debits
    • 5.0% + 5¢ for credit card
  • For Amazon Payments balance transfers < $0.05:
    • 20% of the transaction amount, with a minimum fee of $0.0025
  • Qualified developers can apply for the following monthly volume discounts for credit card transactions:
    • 2.5% + 30¢ per transaction for monthly payment volume from $3,000- $10,000
    • 2.2% + 30¢ per transaction for monthly payment volume from $10,000 – $100,000
    • 1.9% + 30¢ per transaction for monthly payment volume over $100,000

On the surface this new service does not appear to differentiate itself from Google Checkout or Paypal in any meaningful way. It will be interesting to see its uptake by merchants and consumers.

You can read more about Amazon Flexible Payments Service on their website here.

Changing or adding products after establishing a merchant account

Monday, July 23rd, 2007

When establishing your merchant account the acquiring bank that is reviewing your application is assessing the risk associated with establishing your account. They factor in many variables including ones associated with the product(s) you are selling. Different products have different risks associated with them. Let’s compare two products:

  • Pencils
  • Selling pencils is a low risk product because not only will few people will attempt to commit fraud in an attempt to get their hands on pencils, but the customer’s expectations as to what the pencils are supposed to do a small in scope and easily met. As a result the potential for chargebacks is extremely small.

  • Electronics
  • On the opposite end of the spectrum would be electronic gadgets like cell phones and stereos. These are frequent targets of fraudsters who essentially are trying to steal these items from you in one form or another. They also have tendencies to not meet customer expectations as they may not function as well as expected. As a result the potential for chargebacks is much greater.

Because an acquirer (A.K.A. your processing bank) is exposed to potential for losses whenever a chargeback is filed the higher the chargeback potential for a product the more difficult it will be to establish a merchant account for selling that product. This means when your merchant account is approved it is based on the merit of the products you offered at the time of your application.

So what if you want to add more products to your store? Well, there are a couple different scenarios for this:

  1. The newer products are very similar to your current products
  2. In this case you shouldn’t have to notify your acquirer. Since they based their decision to approve your merchant account on the type of the product and not specific products then you are in effect not making a sigificant change to your product offering. They have already factored these product types into their decision and adding these pr0oducts won’t affect that decision.

  3. The products you are adding not related to the your current products
  4. In this case you should contact your acquirer to let them know you will be adding these different products to your website. How they handle it will vary but if the number of products are significant and/or the product line is significantly differently you can expect your acquirer to expect a new merchant account to be opened for the new products. This will also certainly mean having a new website as well. The reason for this is due to different products having different risks.

    It also has to do with how your business is presented. Usually a business name is modeled after the products it offers. If you are now offering different products for your business then when you established the business there is a good chance your current business name will not match the theme of your new products. This will cause confusion when your customers get their blling statements and result in an increase of chargebacks.

What it all boils down to is if you plan on adding products unrelated to the products your business currently offers then you will need to contact your acquirer and verify with them that it is okay to use your merchant account to accept payment for those products. If you think you can add them without your acquirer knowing think again. All it takes is one chargeback to get their attention. At that point instead of taking a customer friendly approach to the situation they may take a defensive approach and hold your funds while they get the matter squared away. If you don’t mind having a large sum of your money held for six months then this won’t be an issue. But if you want your money and don’t want your acquirer holding it back from you, always be proactive and let them know of a product change.

What exactly is a Third Party Processor?

Monday, June 4th, 2007

A common question we see asked online is, “What exactly is a Third Party Processor”? Well, a third party processor allows other businesses to share their merchant account. This means the merchants who shares their account doesn’t have to apply with a merchant account provider. They apply directly with the third party processor.

The ramification of this are as follows:

1) You have to follow the rules of the third party processor. Because it is their account and they are responsible for it their rules are tighter then a normal merchant account’s rules. They can shut down your account at any time for any reason. Same goes for holding your funds.

2) Their name appears on your customer’s statements. Because it is their account their name is what will appear.

3) Their rates tend to be higher then a normal merchant account because they have to mark it up to make a profit. But other fees, like monthly fees, may be waived which is a good thing.

4) They tend to accept people that merchant account providers don’t. This includes people with bad credit or high risk products. Merchants who have had their merchant account closed can usually still use a third party processor.

To see how third party processors compare to true merchant accounts check out our article Merchant Account Comparison which compares Paypal, Worldpay, and 2Checkout to a true merchant account and gateway.

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Third Party Processor Indicted for Money Laundering

Tuesday, May 1st, 2007

From Digital Currency Business E-Gold Indicted for Money Laundering and Illegal Money Transmitting

A federal grand jury in Washington, D.C. has indicted two companies operating a digital currency business and their owners on charges of money laundering, conspiracy, and operating an unlicensed money transmitting business, Assistant Attorney General Alice S. Fisher of the Criminal Division and U.S. Attorney for the District of Columbia Jeffrey A. Taylor announced today.

The four-count indictment, handed down on April 24, 2007, and unsealed today, charges E‑Gold Ltd; Gold & Silver Reserve, Inc.; and their owners Dr. Douglas L. Jackson, of Satellite Beach, Fla.; Reid A. Jackson, of Melbourne, Fla.; and Barry K. Downey, of Woodbine, Md., each with one count of conspiracy to launder monetary instruments, one count of conspiracy to operate an unlicensed money transmitting business, one count of operating an unlicensed money transmitting business under federal law and one count of money transmission without a license under D.C. law.

Subsequent to the indictment, the Department of Justice also obtained a restraining order on the defendants to prevent the dissipation of assets by the defendants, and 24 seizure warrants on over 58 accounts believed to be property involved in money laundering and operation of an unlicensed money transmitting business. The restraining order does not limit the E‑Gold operation’s ability to use its existing funds to satisfy requests to exchange E-Gold into national currency for customers of non-seized accounts, or its ability to sell precious metals to accomplish the same, once approval has been received.

According to the indictment, E‑Gold’s digital currency, “E‑Gold,” functioned as an alternative payment system and was purportedly backed by stored physical gold. Persons seeking to use the E‑Gold payment system were only required to provide a valid email address to open an E‑Gold account – no other contact information was verified. Once an individual opened an E‑Gold account, he/she could fund the account using any number of exchangers, which converted national currency into E‑Gold. Once open and funded, account holders could access their accounts through the Internet and conduct anonymous transactions with other parties anywhere in the world.

The indictment alleges that E‑Gold has been a highly favored method of payment by operators of investment scams, credit card and identity fraud, and sellers of online child pornography. The indictment alleges that the defendants conducted funds transfers on behalf of their customers, knowing that the funds involved were the proceeds of unlawful activity; namely child exploitation, credit card fraud, and wire (investment) fraud; and thereby violated federal money laundering statutes. The indictment further alleges that the defendants operated the E‑Gold operation without a license in the District of Columbia or any other state, or registering with the federal government, and thereby violated federal and state money transmitting laws. The indictment alleges that this conduct occurred at various times from 1999 through December 2005.

How this indictment will affect the company is unknown. But any merchant currently using E-Gold should consider switching to another processing provider while they sort this out. There is always the possibility they may go bankrupt and/or freeze or hold the funds of their merchants. If this occurs the odds of the merchant getting their money back is very slim.