Allowing Others to Use Your Merchant Account

Monday, February 11, 2008

We all have friends that ask us for favors and to help them out in a pinch. After all, what are friends for? But sometimes you just have to say "No", especially if they are asking to use your Merchant Account. Allowing someone else to use your Merchant Account is called Factoring and is against Card Association rules (Visa, MasterCard, Amex, Discover). Factoring could lead to cancellation of your Merchant Account and/or hefty fines from the Card Associations.





You might be asking yourself why letting someone else process an occasional transaction through your account is considered such a no no. After all, who gets hurt? The short answer is…YOU!

The issue that arises when you process on behalf of someone else is that your credit card processor assumes the transaction fits your particular risk profile as determined by your SIC code, the underwriting that was performed when you applied for the account, and the ongoing monitoring of your account. Lets say your friend is selling products or services that are inherently more risky than yours. It is likely then that those transactions will experience a higher rate of fraud and chargebacks than you normally incur. This will raise all sorts of red flags at your processor and your account will almost certainly be suspended pending an investigation by the loss prevention department. If it is determined that you were factoring then your account will be closed and you will be placed on the Terminated Merchant File (TMF/MATCH) list. Once on this list, it is nearly impossible to get another merchant account.

Excuses Not To Have a Merchant Account

When your friend asks to use your merchant account he/she will undoubtedly make use of one of the following excuses as a reason not to have a merchant account.

• "I don't make enough money to cover the cost"

A merchant account will typically cost about $25.00 per month for a very small merchant. That covers the monthly customer service fee and minimum processing fee. That works out to be only $0.83 per day, less that a cup of coffee! You might also want to point out to your friend that since they do not advertise that they accept credit cards, who knows how much business is lost to their competitors who do accept credit cards. The increase in business they will get from accepting credit cards will probably more than offset the costs.


• "I don’t have enough money to buy the equipment"

Retail merchants can buy used terminals for less than $100 or refurbished ones for less than $200. If they want a new terminal they can lease one for $10 to $15 per month depending on the make/model with nothing down on approved credit. They could also use a virtual terminal that is accessed via the Internet and requires no up-front investment. Internet merchants can get payment gateways that have no setup fees and cost between $15 and $25 per month for unlimited transactions.


• "My credit is bad"

Generally, as long they are in the United States, don’t have a recent bankruptcy filing, are applying for less than $25,000 a month in credit card processing volume, and not selling any high risk items, their personal credit history should not affect their ability to open a merchant account.


• "My business is seasonal"

Most merchant account providers offer seasonal merchant accounts that are turned on during the months of the year that you choose and turned off during the rest of the year. When the account is turned off no fees are charged to the merchant during those months.

Encourage Your Friends

Don’t let your friends take advantage of you and put your merchant account in jeopardy! Encourage them to invest a little money in their business and open their own merchant account if they want to accept credit or debit cards as a form of payment. Ask them to contact an ISO or agent and open an account today!

We certainly hope this podcast has been of benefit to you. Look for this article in an upcoming issue of "Pingzine" Magazine.

Please call Loud Commerce at 800-931-9835 or contact them and let us create a customized payment processing solution for you including a free no-obligation quote and cost savings analysis.

Merchant Direct Access Service

Wednesday, January 09, 2008

This podcast is brought to you by LoudCommerce.com, and voiced by Lynn Lynn Brooks.com. Today, let’s talk a little bit about “Merchant Direct Access Service”.

Visa offers merchants a service called the Merchant Direct Access Service (MDAS) which allows merchants access to address verification service (AVS) via a toll-free number, using a touch-tone phone. The service is specifically targeted to small mail order / telephone order (MO/TO) or Internet merchants for whom AVS may not be cost-effective. Merchants using MDAS are charged on a “per transaction” basis.

To use the MDAS, you need access to a touch-tone telephone and your Merchant Access Code (MAC) which you can obtain from your merchant account provider. To request an address verification, call the MDAS toll-free number, 1-800-VISA-AVS (1-800-847-2287). An automated voice unit guides you through the process of submitting a customer’s account number and address, and gives you the results of the verification.

MDAS responses are similar to AVS, but do not include a single-letter response code. There are currently five responses that can be obtained from the MDAS:

1. Exact Match: Street address and zip code match
2. Partial Match: Street address matches, but not zip code or zip code matches, but not street address
3. No Match: Neither the street address nor zip code matches
4. Retry Later: Card issuer system is not available at the present time
5. Global: International address; cannot be verified

Discount Rates

Tuesday, October 09, 2007

This is the first in a series of audio casts talking about the various merchant account fees that are charged by payment processors. It’s important to understand that fees can vary significantly from one payment processor to the next. The only way to make an accurate comparison between processors is to compare their “effective processing rate”. That means, calculating the total monthly processing costs you will be paying and dividing that amount by the dollar volume of transactions you expect to process.

Once you sign up with a payment processor, your Merchant Agreement should show all of the fees you will be charged. You should carefully examine your monthly processing statement and compare the fees you are paying to your agreement to make sure you are being charged in accordance with the agreement. If you see that you are being charged for something that was not on your merchant account agreement, contact your merchant account provider immediately.

The first fee you will be likely to see when shopping for a merchant account is the Discount Fee. The discount fee is the amount that is deducted from each sale you make and is stated as a percentage. The discount fee varies depending on whether you will have a “keyed” account or a “swiped” account. Keyed accounts are those that will have less than 30% of their transactions swiped through a point of sale terminal or card reader. All Internet merchants will have keyed accounts. Currently, the discount fee for keyed accounts with FDIS Loud is 2.19% and for swiped accounts is 1.69%. The reason for the 50 basis point spread is basically a risk premium that is charged because keyed transactions are inherently more risky than swiped transactions. With swipe transactions a merchant can see the card, look to see if the signature box is signed and match that to the signature on the receipt, observe the behavior of the customer, as for ID, etc. With a keyed transaction you don’t have any of these anti-fraud tools available. Therefore, the risk of chargeback is higher, thus the risk premium.

The discount fee that all processors will quote to prospective merchants is called the Qualified Rate. This is the rate a merchant will pay on qualified transactions. Many merchants don’t realize that a large percentage of their transactions won’t be charged the qualified rate. Instead, these transactions will be “downgraded” to mid-qualified or non-qualified and will be charged a surcharge. Whether a transaction is charged at the qualified, mid-qualified, or non-qualified rate depends on a number of factors including the type of credit card being used by the customer, specific information contained in the transaction, how and when the transaction is processed, your industry, and the type of merchant account you have. Internet merchants will typically have a 2-Tiered pricing schedule which means that transactions will either be qualified or non-qualified. Retail merchants with swiped accounts will have 3-Tiered pricing. Without knowing what the mid-qualified and non-qualified rate will be, you will be unable to calculate a true effective processing rate.

Please call Loud Commerce at 800-931-9835 and let us create a customized payment processing solution for you including a free no-obligation quote and cost savings analysis.

Thanks for listening!

Merchant Account Reviews

Saturday, July 21, 2007

Today we are talking to you about Merchant Account Reviews.

There are scores of websites offering reviews of merchant accounts. Unfortunately, most of the websites will usually be one-sided, favoring one ISO or Agent. If you are in the United States, you have hundreds of ISO’s to choose from, and thousands of Agents.



So what does matter in these reviews? You can consider these opinions but most people will not give positive comments for a company. What about your money? With the larger companies (First Data, Nova, Chase-Paymentech), you know your money is safe. You have a large corporation to back it up. Most agents will resell for one of these companies (and we have already discussed how to choose a United States merchant account provider). Most should be able to give you a free rate review if you have an established processing history. This review is an important factor. It will allow you to see if you could save money by changing merchant account providers. And you might be able to keep the same electronic payment gateway so your website will not need to be re-programmed.

Merchant Accounts - Which One Is Right For You

Tuesday, May 22, 2007

Today we are talking about the different types of Merchant Accounts that are offered by Credit Card Processors. There are basically two types of Merchant Accounts. The first type is called a Card Present or "Swipe" Account because the card is physically present and is actually swiped through a magnetic reader that is on a point of sale device or attached to a computer. The second type of merchant account is called a Card-Not-Present or Keyed Account because the card is not physically present and the information is typed or "keyed" into a point of sale device or payment gateway.

Chargeback Prevention for Internet Merchants

Monday, April 16, 2007

Chargebacks can occur for a variety of reasons. From the simple "I didn't buy it", to "I didn't get it". So lets look at a few of the most common reasons for chargebacks and what you can do to prevent them.

Merchant Account Fraud

Thursday, March 29, 2007

When applying for a merchant account, merchants tend to look for the cheapest processor. This might be OK for some, but for others, you might want to consider who you are giving your personal information to.

For more information, please see Merchant Account Fraud on My Merchant Account Blog.

Visa Credit Card Security Features

Friday, March 23, 2007

When a consumer gives you his / her Visa credit card to process, you should swipe the credit card and hold on to the credit card. Every Visa card contains a set of unique design features and security elements developed by Visa to help merchants verify a card's legitimacy. This will allow you to take a look at the credit card to verify the security features and to compare the signature on the back of the card with the signature on the sales receipt.


To read more, check out Visa Credit Card Security Features on My Merchant Account Blog.

Preventing Online Fraud

Sunday, January 14, 2007

One of the first things you need to do as a merchant is to verify the consumer. On card-present transactions, this can easily be done by asking for a valid photo identification card, i.e. a driver's license or state issued ID card. On card-not-present-transactions, this is much more difficult for the merchant to accomplish.


To read more, check out Basic Fraud Prevention for Internet Merchants.

Non Receipt of Goods or Services Chargeback Codes

Saturday, December 23, 2006

There is only one chargeback reason code in this group. These chargebacks can happen from time to time if the consumer claims the services were not provided or the goods were not delivered - maybe even not received in a timely fashion.

Reason Code 30: Services Not Provided or Merchandise Not Received

Reason Code 30 can happen when card issuer receives a claim from a cardholder the merchandise or services ordered were not received or the cardholder cancelled the order as the result of not receiving the merchandise or services by the expected delivery date.

The most common causes is when the merchant:

• Did not provide the services
• Did not send the merchandise
• Billed for the transaction before shipping the merchandise
• Did not send the merchandise by the agreed-upon delivery date

To read more, check out My Merchant Account Blog.

Some useful links to check out that are mentioned in this show: LinkShield™ and LinkPoint Secure Payment Gateway.