MERCHANT ACCOUNT COMPARISON

Merchant account providers vary greatly in their prices and services, so it's important to do your due diligence if you want the best deal.

A merchant account banner headline may highlight a low discount rate, but realize that merchant accounts have multiple fee schedules depending on volume and credit, and a host of hidden charges, so you'll have to drill down for the true costs.  For example, you might see and ad that says 1.39% discount rate.  But this rate may be for customers with huge volume and perfect credit.  If you're not a nationwide department store, you may receive a much higher rate. 

Be aware that the lowest rate will be when receiving payment at the point of sale through a terminal.  This is called the "Swiped" rate.  The MOTO rate will always be higher.  This stands for Mail Order / Telephone Order.  The customer is not present and there is a higher risk of fraud in these transactions.

Be aware, there is no such thing as a "Free Merchant Account".   This kind of ad only means that there is no set-up fee.

Be sure to get a complete list of all fees.  Any merchant account sales rep will be glad to sign you up and allow you to find those fees later.  

Examples of other fees:

Transaction Fees, Statement Fees, Termination or Cancellation Fees, Setup Charges, Batch Fees, Minimum Monthly Processing Fee, Customer Support Fee, Technical Support Fee etc.

Chargebacks

A chargeback occurs when a customer disputes a credit card charge for a host of reasons including being dissatisfied with the product, price or service.  Find out exactly what the payment processor's chargeback policy is including arbitration procedure and how much each chargeback will cost.

Check Services

Some payment processors offer a host of electronic check services which can be extremely helpful.  These services may be included in your monthly fee or not.  Check verification is not full-proof but usually runs a check through a database which flags suspicious activity or bad check writers.  The service may also offer 'real-time' account verification which verifies that there are sufficient funds in the check-writer's bank account.   Check guarantee is like check insurance, it guarantee's payment of all checks for a specified percentage of the check amount.

Collection Services

Some payment processors offer convenient check collection services with corresponding fees.  This can be very helpful if you accept a lot of checks.  RCK is an automated way to Represent Checks with insufficient funds electronically.  A merchant using this service might stamp the back of a check with a short paragraph authorizing electronic representment for returned checks with a returned check fee.  The customer initials this agreement at the point of sale.   Should the check not clear, the payment processor will make a couple attempts to withdraw the check amount and penalty from the customer's account.   Many times this service is free because the payment processor gets the returned check fee.

Virtual Terminal

A virtual terminal is a secure connection to the payment processors website where you can login and use your computer to accept credit card payments or electronic checks.  This service can be great for professional offices or home and remote businesses who accept payments over the phone or by mail.   It may or may not be included in your monthly service charge.

Electronic Invoices

This is a convenient way to create an invoice and email it to a customer for payment.  When they click the link in the email, it redirects to a secure website where they can pay electronically by check or credit card.  It may or may not be offered by your payment processor.  Always ask if it's included in the monthly fee or if there's an additional charge.

Shopping Carts

Also, you may be interested in a shopping cart and selling merchandise online.  Be sure to find out if you're locked into using their shopping cart, or if there is an easy way to download a module to enable your own shopping cart.  Proprietary shopping carts can be expensive.  Find out all of the volume charges for your shopping cart and how much technical support is available.

Terminals

Your point-of-sale terminal is important as well.  Find out if you can buy your terminal from a third party and shop around for a better price.  Also find out if your terminal will work with other providers should you choose to change.  You may need a wireless terminal if your sales are on the road, at tradeshows, or in a customer's home.

Customer Service

What kind of customer service will you be receiving?  Have they outsourced their service overseas, or will you be talking to someone in-house?  Is it 24/7/365 or only during business hours? 

ISO or Real Payment Processor?

Finally it's important to know if you are dealing with the actual payment processor, or simply an Independent Sales Organization (ISO) which is taking on a sizable middleman profit and will not be servicing your account once the contract is signed. 

PCI Compliance

The Payment Card Industry has created a set of security standards for all merchants who accept credit cards. Make sure any vendor you use is PCI Compliant.  See link below.

Shop around and ask lot's of questions... good luck!

Note: Chart below was posted on government site on 12/7/04...
check with individual Merchant Account Providers for most updated information and rates.
Minority Business Development Agency

Regarding PCI Compliance - Payment Card Industry Security Standards

Retail and eCommerce Reports

PayPal Merchant Accounts

eCommerce guide by Export.gov