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7 Tips for Merchant Account Shopping

  1. Don’t be fooled by low, teaser rates.
    • Merchant account sales people will advertise their lowest possible rate and sell you on that rate.  What they won’t tell you is that rate is only for “qualified transactions”, and very few cards you take will qualify.
    • Be prepared to pay an avg. of around 2% – 2.5% no matter what merchant you go with.  If somebody tells you they can get you in the 1% range on all your transactions…well let’s just say they’re not exactly honest.
  2. Watch out for expensive hardware costs.
    • Many merchant providers have expensive hardware purchase or lease programs that they don’t disclose while discussing the actual merchant rates.  If you get caught up in merchant rates and service charges you may forget about hardware like credit card readers, receipt printers, or barcode scanners.  Many will hide hardware leasing costs until after you’ve signed a long-term contract.  Don’t let them slip that past you.
  3. Ask about immediate use of funds.
    • Many merchant account solutions will require you to batch out all of your transactions at the end of the day and the money will not be available in your bank account for 2 – 5 days after that.  Some others will actually hold a portion of your funds for up to 30 days (sometimes longer) in order to help protect against chargebacks.  If you want immediate access to your money you will want to make sure and find a provider that offers this such as PayPal.
  4. Ask about the refunding of your merchant account fee when you refund your customer.
    • Many merchant account providers will not refund your original fee when you refund your customer.  In fact, often times they will charge an additional fee for the refund transaction itself.  If you are issuing a number of refunds through-out the year these fees can really add up and you’ll be losing lots of money on sales you didn’t even make.
  5. Ask about declined transaction fees.
    • If you’re setting up a merchant account for an online store you’ll need to be prepared for declined transactions.  This can happen a lot if somebody decides to use your website to test a bunch of stolen credit cards, for example.  If your merchant account charges fees on these transactions you’ll be paying a lot of money for nothing.
  6. Don’t sign a long-term contract.
    • There is so much competition in the merchant account industry these days that it’s very easy to find a solution that will not make you sign a contract.  Just don’t do it.  If they won’t match a low rate without a long term contract then I wouldn’t recommend risking them trying to nickel and dime you in a lot of other places.  I’ve seen it all too often.
  7. Watch out for bank merchant account outsourcing.
    • Don’t make the mistake of assuming a big bank will bring you lower costs or seem more ethical.  A large number of big banks simply broker merchant account deals with smaller companies and pass the extra cost (their profit) on to you.
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