My Merchant Account Blog

Who Is the Worst Merchant Account Provider

Sunday, April 02, 2006

There is really no such thing as the worst merchant account provider.  There are some very large merchant account providers with a large client base.  There are some really bad agents though.  Keep in mind that these agents are salespeople.  They make money selling you an account.

Some of the larger merchant account providers (Chase / Paymentech, Cardservice, First Data Merchant Services, Ipayment) boast a huge client base.  With these merchant account providers, they do a significant amount of business per year.  For example in 2004, Cardservice, who is owned by First Data processed $10,270,500,000 in 123,800,000 transactions alone.  (update: First Data now owns Cardservice and operates as First Data Independent Sales).  The majority of these merchants use the LinkPoint gateway.  This is the same for Chase / Paymentech who First Data owns 50% in. (Update, Paymentech split from First Data).  They processed $254,949,800,000 in 3,448,800,000 transactions and $189,782,500,000 in 3,353,300,000 transactions respectively.

Cardservice has a very lax policy in their merchants.  They will approve merchants usually within 24 hours.  However, once all the background information has been obtained by that merchant (and it is not good: e.g. maybe the merchant is on the TMF list), the company will suspend or terminate the merchant account.  This increase Cardservice's statistics of course of hanving unhappy merchants.  And then of course when Cardservice suspends / terminates an account because of chargebacks or potential fraud, people tend to complain.  Whenever a merchant account provider says you will be approved within 24 hours, be cautious - complete vetting of the merchant cannot be done within this time period.    The MATCH list checks the business thoroughly, including the address.  So if your address happens to match an address on this list, your merchant account will be suspended until things get sorted out.

Internet Payment Service Providers or Third Party Payors

While Internet Payment Service Providers (IPSP) or Third Party Payors (3PP) allow you to basically use their merchant account, this can cause problems as well.  They have more rules and regulations to follow.  One individual even created their own site because he / she was very upset with Paypal: Paypal Sucks. There is also Screw Paypal (warning adult content). It also goes to prove what I just said above - lax policies with Paypal and Cardservice can actually cause more problems for them.  They try to help merchants start their business, but some merchants take advantage of that help and they try to actually rip off Paypal and Cardservice as well as their merchants.  And remember, you will always hear more complaints about a company than you will compliments.  It is human nature to complain more unfortunately.

Paypal is a pretty large aggregator.  Currently, on their site today they say they have over 96.2 million members.  With that size of client base, you are always going to find problems.  The longer you are with a company and the more you do business with a company, you will increase your chances of problems.

Some of the larger problems with Paypal is the verification process, almost similar to First Data Indepent Sales.  To get a Paypal account takes just a few minutes.  However, you need to be 18 years old and a lot of individuals seem to miss this in their Terms of Service.  Once Paypal finds out, your account can be suspended or terminated.  Your funds can be held for up to six months.

What To Look For Then

It seems like this post has been a bit negative, but it is what it is.  First, look for a merchant account provider that does not approve you in 24 hours.  To properly vet a merchant account, it usually takes three to four business days.  With this process, the merchant account provider is actually saving money. 

Most merchant account providers rely on resellers, agents, or partners (salespeople) to offer their products and services.  Some agents will overcharge a merchant in order to make money.  For example, more than a decade ago, it was not unheard of to be charged $1,000 for a set-up fee.  Now, you should not be charged a set-up fee for the merchant account.  Some electronic payment gateways will have a set-up fee.  For an Internet Merchant Account, we recommend the Quantum Payment Gateway - there is no set-up, month, or no transaction fees associated with the gateway.  Don't take for granted the salesperson will tell you the truth.  You will be asked to sign a contract.  See if this contract has a term (for example, one year, two years, or three years).  You should not agree to this.  If your business happens to fail and you sign a three-year agreement, you are still on the hook for these fees.  If you do not pay these fees, the merchant account provider can put you on the MATCH list and they are the only ones who can remove it.

Don't be afraid to ask questions.  While you are reviewing the merchant account, if you come across anything that you do not understand - email the reseller.  If the reseller gave you misinformation, you might be able to get out of your contract (if any).  It is always better to have things in writing.

Comments

Mala said...

Then who is the best one?

1/28/2010

Corey said...

Good Question. I would recommend a smaller company - those usually will provide you with better customer service in the long run - check out http://www.milehighmerchantaccounts.com

6/28/2010

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