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Let Me Use Your Merchant Account

Wednesday, January 09, 2008

Maybe you have a friend that has a small business.  And occasionally you allow him to run a credit card through your terminal or electronic payment gateway.  You see nothing wrong with this since he is your friend.  Unfortunately, chances are very great that this is against your merchant account agreement and card association rules (Rules for Visa Merchants and MasterCard Merchant Rules).  Allowing your friend to use your merchant account to accept credit cards will make you susceptible to chargebacks, specifically Reason Code 81 (Fraudulent Transaction - Card-Present Environment) or Reason Code 83 (Fraudulent Transaction - Card-Absent Environment) under Fraud Codes for Chargebacks.  The acquiring bank might also issue Reason Code 75 (Non Receipt of Information Chargebacks).

If your merchant account provider receives one of these reason codes from the issuing bank for a chargeback, your merchant account provider might suspend your processing until an investigation is complete.  Reason Code 75 usually will not be as bad as Reason Code 81 or 83, however you always want to do everything you can to prevent chargebacks.

Also, chances are very good that your merchant account provider will place you on the TMF / MATCH list.  Once on this list, it is near impossible to get another merchant account.

Excuses Not to Have a Merchant Account

A lot of times, business owners will make an excuse not to have a merchant account.  Unfortunately, these excuses might actually lead to the business going under.

Not Enough Money

Maybe your friend says he does not make enough to warrant a merchant account.  Well, a merchant account usually costs between $25.00 - $50.00 a month.  Most people have a cell phone that costs this much money per month.  And a lot of these fees are incorporated into your discount rate.  And since he does not advertise that he accepts credit cards, who knows what how much business is lost.  Always have confidence in your business so you will be able to invest money into your business.

Bad Personal Credit

Most merchant account providers understand people will run their business differently from their personal accounts.  If you are in the United States, applying for less than $30,000 a month in volume, and not selling any high risk items, your personal credit history will not have that much to do with your merchant account. 

Do not sign up for multiple merchant accounts if you think you might be turned down.  It usually takes less than 24 hours to be approved, wait for that confirmation.  Otherwise, you might end up with more than one merchant account which will cause you other problems.

Actually, your friend has a better chance of getting a merchant account than you since you are on the TMF / MATCH List.

Encourage Your Friends

They are your friends - encourage them to invest a little more money into their business.  You have seen first hand how much more business credit cards have brought to your business, share that knowledge with them.  Ask your friend to contact your ISO / agent for more information today!

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