Recently, I was taking with a client who said, “When can I do the fun stuff?” I asked her what she meant by the fun stuff.
“Working with clients,” was her response.
Sure that’s the fun stuff, but without the foundational work in place we build the “fun stuff” on a house of cards.
One area many newer entrepreneurs don’t put a lot of time into is determining who their credit card service provider will be. Although not the “sexiest” topic around, finding the right match for your needs is a must do.
Recently, I met Ben Thomas from Payline Data at the Internet Prophets Conference. Ben shared with me some of the most common mistakes an entrepreneur makes when deciding on which company to go with.
Below are the top ten questions their customers ask around merchant account decisions.

Man our customers have a lot of questions about their merchant accounts!!

We have decided to take the list of top 10 questions that our customers submit about their merchant account and post them here so maybe a few of you might find your answers before you call us or email us… although we like the calls and emails… so keep those coming and we can talk about more important things like… the weather… sports… Jeff’s new haircut… Whatever floats your boat.    Okay, enough of that.  Here is the list in no particular order: hmm, Jake makes a good point.  We cheated and I guess you got our top 14 list as some of these are 2 for 1s… Isn’t it just your lucky day

Q: How long does it take to set up a merchant account?

A: It normally takes about 24 hours for your application to be reviewed.  Most accounts with low risk and established paperwork will be approved in this period.   If you have slightly higher risk or there is a question on your paperwork, it could take up to 5 days for approvals.   If you don’t return our phone calls or submit the required information, it could take a LOT longer, so pick up your phones people.  okok, enough of that.   Once approved, your Payline representative will schedule the setup process as soon as possible.   We promise we will communicate the status to you the entire time.

Q: Are the transactions and funds secure?  What is PCI Compliance?

A: Yes, in fact, Payline is 100% secure.  We are also PCI compliant and can assist your business too, even for mobile processing on your phone or tablet.  Don’t know what PCI DSS  (Payment Card Industry Data Security Standards) means?  Then you may need to call a Payline rep today to find out, and not just if your online, everyone that accepts credit and debit cards has to be PCI compliant these days.   Like to read a lot first… Check out this page.  The framework of the PCI data security standards has existed in different forms for some time now and continues to evolve.  You may be more familiar with the payment brands’ programs that promote the implementation of the PCI DSS.

Q: What are the requirements to open a merchant account?

A: To qualify for a merchant account, you must be a US resident and have a US business checking account, a Social Security Number or Federal Tax ID number and a business license (or other documentation from a third party verifying that you operate the named business at the given location).  We will help you fill out the app and make sure your documents are in a row so we can get this correct.   We may even require a photograph your business to verify it’s existence.   Our underwriters don’t mess around when it comes to fraud so we have to make sure you aren’t planning on committing any soon.

Q: Do I need a bank account to accept credit/debit cards and does it have to be a business checking  account?  Do I need to change my account or use your (Payline’s) bank?

A:  The banks are in business for a reason.   We would love to send cash in the mail but the US post office told us to stop doing that a long time ago.  So, You will need a bank account to receive funds from your customers’ credit card payments.  It does have to be a business account and your current business checking or savings account is the best option.  When the underwritters see an account with a balance and monthly cash flow that is similar to the processing limits you are listing on your application, it will make approving your account much easier.  You do notneed to change your bank to set up a Payline merchant account.    Anyone that tells you otherwise is just pulling the wool over your eyes.

Q: Can my credit status prevent me from establishing a merchant account to accept credit/debit card payments?

A:  Unfortunately, Yes!   However, it is usually only when you are currently going through a bankruptcy or if you have numerous tax liens.   If you do fall into this category, talk to a Payline representative first.  We can help you come up with a strategy to try to get your account approved.   Plus, your credit might not be as bad as you think.   We all know bad things happen to good people and as entreprenuers ourselves, we’ve been there.  Let us help you get approved so you can get back to making money again!   [/toggle]

Q:  I have a storefront and do retail purchase with (card present) swiped in a terminal.  Can I start doing (card not present) e-commerce and have the funds go into the same checking account ?

A:  So you heard about this thing called the internet too!?!  Great news.  The answer is YES by the way.  However, if you are currently a Payline customer and you want to make this change, you may need to open a new merchant account that complies with e-commerce requirements and rates.   If your switching to Payline, then make sure you let us know this during the application process.   Your Payline representative can help you figure this all out.   Give us a call now!

Q: What is a chargeback?  How do I avoid charge backs?

A:  More fees??  Yuck!!  A chargeback occurs when a customer receives their credit card statement and does not agree with the charges applied.   (very common if you ever used a third party service like PayPal.)  The customer can either call the merchant or get a return on their merchandise or they can call the number on the back of their card (the issuing bank) and issue a charge back against the transaction.  It’s always best practice for a merchant to do as much as possible to resolve any customer issues before the customer initiates a chargeback.   However, bad things happen to good people and often times these are mistakes and the customer doesn’t even realize they are costing you money!   In the worst case, Excessive chargebacks can cause termination or “freezing” of a merchant account.  Unfortunately, some industries just can’t avoid these and if you are a larger business, it is likely to happen (Newton’s law you know).   Lucky for you, Payline prides ourselves on helping clients understand and manage chargeback situations.    The first step to avoiding charge backs is using a business checking account. If you have a website, be sure your doing business as” DBA name is the name on the site as it is for your merchant account.   This will look more familiar to a customer when they see the transaction on their statement.   If you set it up right, your business telephone number can be placed on the statement next to the corresponding charge, so the customer will be more likely to call you instead of the bank and simply return the goods.

Q: What determines my rates?  How can I lower my rates?

A: Your rates are determined in many ways.   The best way to lower your rates is to thoroughly assess each component of your statement and consider the many other cost factors, because getting the lowest rates doesn’t necessarily mean that you’re getting the best deal.  Also, ensure You Have the Right Type of Merchant Account for Your Business.  There are different types of merchant accounts based on the way credit card transactions are accepted.   Generally, four major items determine your rates:

  1. Brand and type of card the customer uses (Credit, Debit, Rewards, Corporate, etc.)
  2. Type of business you run (Retail, restaurant, Gas Station, Hotel, e-Commerce, etc.)
  3. Type of transaction that was made (swiped vs keyed vs online, etc.)
  4. Information collected with transaction for verification (address verification, tax amount, etc.)

These four things will determine what your Visa or Mastercard interchange rates are.   To see the hundreds of rates from Visa and MC see these links:

It is always cheaper to have the right merchant account type for your business.  Always work with a firm that can explain the differences between the different merchant account types and that teaches you to process credit card payments the best way for your business.  We highly recommend an Interchange Plus pricing strategy if you can get it.   This is the simplest and most transparent of the pricing structures.  Merchants should always look for the best overall pricing, while not neglecting the service they deserve.  Follow these guidelines and you can find a merchant service provider who will give you everything your business is looking for.    See how your rates compare with Payline at www.paylinedata.com/rates

Q:  What am I actually paying?  What is a “net effective rate”?

A: This replaces the “What are my current rates?” question.  Most people think they know what their current rates are but in reality they are usually miss-informed or reading the statements incorrectly.   There are multiple Pricing Strategies and multiple items that can affect your rates, as described in the question above.  However, finding your net effective rate really is pretty simple.  Look at your statement and find out what your NET credit card and debit card transaction volume was.  Then look for your total gross fees (Interchange plus transaction fees, plus all other fees).  This is the tricky part where many of our competitors will make it very difficult to find the total gross fees paid.   Once you figure the total fees, simply divide your gross fees by your NET sales for a given month and then multiply that number by 100. For example:
$305 in gross fees / $10,000 in NET sales volume * 100 = 3.05% net effective rate
It will often surprise merchants when they do this calculation right and they find a rate much higher than the “discount rate” they thought they were getting.  This is not uncommon and given any particular month the net effective rate can vary by +/- 0.5%.   This is where having a trained sales professional help analyze your past statements can really help you understand your current fees.   Bottom line, your net effective rate isn’t always a great way to know if you are getting a great deal or getting ripped off.  You have to factor in the specifics of your business, industry, features and especially the level of customer service that you receive.   Getting educated is half the battle though.  To learn more, check out our Credit Card Processing 101 section.

Q:  I want to switch my merchant account provider, what do I need?

A: Switching merchant accounts can seem overwhelming, especially if you are an online business with lots of customers information in a “vault” and no data portability.   So let’s make it easy.  If you are a brick and mortar store, all you need is your current statement (you can also just provide your monthly volume and transaction size), bank account (voided check) and the willingness to fill out a 5 minute application and save up to 40% on your fees!   Normally, you can reprogram your existing terminal, or get a new one for free.   If you have a POS (point of sale) system, just let your sales rep know the provider name and version you are running.  There are a few instances where you can’t switch without switching your POS out but normally your new provider will have an equivalent solution that makes the savings very much worth the switch.
If you have an online business, then you will need the same information (current statement/transaction info, bank account voided check and completed application.  The next challenge (and what keeps a LOT of merchants paying high fees) is to understand your gateway situation.  8 out of 10 times, you can use the same gateway and just switch your MID (Merchant ID) number once your new account is approved.  This alone can save you hundreds or even THOUSANDS of dollars a year in fees.   However, many of our “converts” are currently overpaying for their gateway or other related fees as well.  The most common culprit is Authorize.net.  Another one we have seen lately is braintreepaymentsolutions.  Check out this blog post from feefighters to see how bad it really can be!   No matter who your provider is, the “data portability” can be an issue.   Luckily, this usually can be overcome with a little manpower and the benefits of getting the latest technology (load balancing, auto-update for expiring credit cards, etc.) make this worth the effort.   The other concern may be integration.   This usually means updating your shopping cart.  However, most of the major shopping carts (that aren’t proprietary) already may be integrated with your new gateway.   Payline has literally thousands of options for shopping cart solutions with our gateway solutions so picking a provider with this flexibility is key.
All this being said, the switch process should be made easy for you.  This means having a representative and a tech support team that can answer your questions, give you real savings and assist in making sure that you can save money and spend your time focusing on what is most important to you, your business and your customers.
Ben Thomas can be reached at Payline Data 630-962-4609 Ben@paylinedata.com