Surprises and Hidden Charges
with some Merchant Accounts
Don't
be misled by the Bank's Discount Rate.
There
are different rates for different situations:
- A
"qualified" rate means the card is physically swiped
through a terminal or card reader. Information is read directly off
the card and is sent directly to the processor. It poses the least
amount of risk and is the least expensive.
- A
"Non-qualified" rate means the card is not available to
swipe through a terminal. The information on the card is manually
entered into the processing system.
-
Rates will be lower if an "Address Verification System" is used.
-
The bank's discount rate will apply to the processing of credit cards
issued to consumers. The rate will be higher for Business and
Corporate credit cards.
-
Clarify the length of time the initial discount rate will be in effect,
before the bank makes a rate adjustment.
Make
sure the discount rate that is advertised or promoted is the rate that
applies to your situation.
Don't
just look at the rates alone and overlook other costs.
Terminal
Leases
Costs easily
hidden and usually not included in the quoted monthly payments are a
finance charge, your state’s sales tax rate on the lease, an annual
equipment depreciation charge, and possibly a charge for insurance to
cover loss or damage to the terminal. These additional costs may be
added to the quoted monthly payment, or you might be billed for them.
You may end up paying three times the cost of the terminal, and still
not own the terminal when the lease is up. Then if you want the
terminal, you must pay a fair market buyout.
The
“Reserve”
Some companies
require a “reserve” which protects them against chargebacks. You may
have to pay the reserve in advance, similar to a deposit. More likely,
there will be a reserve fee held back from your transactions, and kept
in a reserve account as insurance against chargebacks. The reserve will
be kept for several months after you terminate your merchant contract.
If it is not overlooked, you would eventually get the funds held
in reserve, but not the interest the funds collected.
Monthly
Minimum
When you setup
your account, you will likely be asked about the amount of charges you
expect to submit each month. This amount will allow the bank to estimate
the amount of the fees the bank will collect.
Some banks will then set a monthly minimum fee. If you do not
submit enough charges for the bank to collect the monthly minimum fee,
then you would be charged the difference.
The
bank discount rate might also be tied to the amount of monthly charges.
If your charges are under a certain amount each month, the bank may take
a larger percentage.
Bank
Setup Fee
Not all
contracts have a bank setup fee, but when there is one, it is a fee that
is typically not discovered until the contract is ready to sign.
Fraud
Protection and Address Verification
Rates will be
lower if you use a fraud protection system or address verification, but
there will be additional charges for using these systems.
Access
Fees
The toll free
800 number you use for processing may be emphasized, but sometimes there
is an access charge for using the service which is barely mentioned.
Gateway
Fees
Some companies
have a proprietary payment processing system. Others use a third-party
card processing service, and will likely charge a monthly gateway fee to
cover the cost of using the third party.
Voice
Authorization Fee
If your
terminal goes down or you can not get through, you will need to dial a
voice authorization number to process your charges. Some companies
charge a fee for this service.
Other
Fees
Batch
Fees, Daily Close-out Fee, Programming Fees, Annual Renewal Fee. Make sure you understand all the terminology in the contract. Don't
sign a contract with anything left blank.
Clarify
when the funds will be available.
Don't
let yourself be misled about how long it will take for the money to
actually get into your bank account. Your bank account will be credited
for the funds before the money is actually available for you to use.
Credited to your account does not necessarily mean available. Clarify
the terminology.
Read
the fine print in the contract.
Here is the "fine print" that
comes with Costco credit cards. This verbiage is typical in the
industry.
"Rates listed are for qualified transactions. Reward cards process
at a
higher rate. A monthly minimum charge applies when qualified transaction
fees and per-item charges are less than $20 per month. Annual
interchange or assessment increases by Visa/MasterCard or Discover may
affect these rates. Rates and fees may change without notice. Rate and
acceptance are subject to underwriting."
Review what others say about the
service. Here is a one resource:
http://www.websitepublisher.net/blog/2009/05/13/beware-the-wells-fargo-merchant-account/
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