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Some Questions To Ask When Looking For A Merchant Account

When shopping around for a merchant account provider, discussing rates and fees seem to be what the discussion focuses on. But are you asking the right questions that will help you determine that the merchant account is right for you? Below are some questions that should help to take the discussion to a deeper level and reveal some details that will help you determine if the provider is a contender or a pretender.

  1. Am I locked into a contract?

    When establishing a merchant account every merchant must sign a contract specifying the responsibilities of both parties. You must agree to abide by Visa and MasterCard rules as well as those of the merchant account provider. However, this does not mean you have to be locked into a contract for any length of time (to learn more about contracts and term lengths see Understanding a Merchant Account Contract’s Length of Term). Visa nor MasterCard require merchants to use their services for any length of time. Contracts that require a merchant to keep their merchant account for any length of time is solely at the discretion of the merchant account provider. The fee associated with terminating a contract early is also at the discretion of the merchant account provider and thus can vary.

    Contract lengths are not always disclosed up front so you must be sure to ask your provider what yours is. Make sure you don’t ask, “Is there a contract?” because the answer is always, “Yes”. You want to be sure to find out how long your contract is for.

  2. Is there a monthly minimum fee?

    The monthly minimum fee, while seen by merchant account providers as a way to guarantee themselves an account is worth establishing, is seen by merchants as a penalty for being small or having a slow month. (To learn more about the monthly minimum see The Monthly Minimum Explained). The monthly minimum fee is not required by Visa or MasterCard. Larger merchant generally don’t have to worry about this fee as they will process enough sales during a month to never see it. Smaller merchants or seasonal merchants can see their costs for accepting credit cards be as much as double of what they should be without this fee.

    A good follow up question to this would be, “Why do you charge a monthly minimum fee”? If they tell you it is a required fee from Visa and MasterCard, you now know they aren’t being very honest with you and you can end your discussions with them.

  3. Is the equipment/software you are selling proprietary?

    Just like computer software not all credit card terminals and software is compatible with all merchant account providers. This is intentional as the merchant account provider selling the equipment is hoping by selling you proprietary equipment they will make it more difficult for you to leave them for another merchant account provider. (See Avoid Proprietary Credit Card Machines). It’s one thing to be locked into a contract with a merchant account provider, but to also be locked in because your credit card processing equipment won’t work with most other merchant account providers is overkill. A good follow up to ask is if there is any equipment they can offer you that is not proprietary and can be used with other processors.

  4. How long does it take to get my funds?

    In the past, a merchant didn’t get paid on their credit card sales until they mailed their credit card slips in to their bank. It could take days or weeks for a merchant to get their funds. Nowadays it is all done electronically. As a result funds for processing Visa and MasterCard transactions should never take more then two business days to arrive in your account. Keep in mind these a business days and not calendar days. Holidays and weekends are not considered business days and anything that occurs after 2 PM are considered as happening the next business day (just like your local bank). If a merchant account provider tells you that it will take more then two business days for your funds to reach your account ask them why.

  5. My average sale is $xx.xx. How much would I pay with you?

    This question gives you an opportunity to see how their rates and fees will apply specifically to your business. It’s one thing to see their sales pitch and the numbers as they present them, but these examples are generic and may not reflect what your business will be paying. Have the merchant account provider calculate what an average transaction will be for you. Follow up by having them figure out what a typical month will cost for you. If you can, even go so far as to try to have them calculate what a month would cost for you with some downgraded transactions. If you have an existing merchant account and are considering switching to a new provider this would be a good way to compare the two. An even better test would be to compare their results with those from our Advanced Fee Calculator and Advanced Account Comparison Calculator.

  6. What will my fees be if I don’t do AVS?

    When advertising merchant account rates the vast majority of merchant account providers advertise their qualified rate and other basic fees like monthly statement fee. This is to keep the advertising simple and is what most merchants will be concerned with as it should constitute the majority of their processing costs. But other fees apply and for non-retail businesses a common reason to pay additional fees is related to doing AVS. Non-swiped credit card transactions require AVS to be performed every time. Not performing AVS will result in the transaction downgrading to a higher rate. By asking this question you will find out what your non-qualified rate will be as this is the rate charged for failure to do AVS as well as other processing errors and some special credit cards.

  7. Is this an introductory rate? Can my rates change?

    A common tactic amongst some merchant account providers is to quote a merchant one rate and after a set period of time raise their rates significantly. Naturally this kind of bait and switch is unethical and harmful to the merchant. Rates should only ever change whenever Visa and MasterCard make a change in Interchange. This happens on average once a year, although it can happen three times in a year or it can go years without happening. In these cases all merchants will experience a rate change so your business is not being singled out. But if a merchant account provider gives you any other reasons for your rates to go up then it is in your best interest to find a new merchant account provider.

  8. What makes you different then the other guy?

    Although there is some advice that can be given related to this question, the best reason to ask it is so your gut can weigh in on the decision. It is a wide open question that forces the merchant account provider to really describe themselves as an entity and reveal a bit about themselves not only as a company but as a person. This is a great time to get a “feel” for them. Numbers and technical specifications are important when making many decisions, choosing a merchant account provider included. But how many times have you wish you listened to your gut feelings?

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