My Merchant Account Blog

Choosing a United States Merchant Account

Friday, April 14, 2006

If you are in the United States and need a merchant account, you have hundreds of merchant account providers to choose from. And the large independent sales organizations (ISO) and merchant services providers (MSP) usually use agents to sell their services. This way they do not have to employ people to sell the services and the agent works when he / she wants to.

The first thing to look for in a ISO / MSP is to determine if they are actually an ISO / MSP. An ISO / MSP will usually look something like this :

Copyright© 2004-2009 CDGcommerce, Inc. All Rights Reserved.
CDGcommerce is a registered ISO/MSP for First National Bank of Omaha, 1620 Dodge St., Omaha, NE - Member FDIC.

This tells you who actually owns the company and what acquiring bank is used.
An agent of an ISO / MSP will look something like this:

Copyright 2005-2006 Cardservice International All Rights Reserved.
FDIS Illinois States is an independent agent office of Cardservice International.
Cardservice International is a registered ISO/MSP for the following FDIC-insured banks:
First Financial Bank, Englewood, CO; Wells Fargo Bank, N.A., Walnut Creek, CA.

It tells you who the ISO / MSP is and it tells you they are an agent.

Here is another example (Sam's Club)

©2006 First Data Merchant Services Corporation. All Rights Reserved.
All trademarks, service marks and trade names referenced in this material are the property of their respective owners.
SAM'S CLUB© Merchant Credit Card Processing is a registered ISO/MSP of Wells Fargo Bank, N.A., Walnut Creek, CA.

A lot of companies partner with First Data to offer merchant services.  First Data is one of the largest transaction processors in the world.  Companies like Wal-Mart, Home Depot, Dick's Sporting Goods turn to them for all their processing needs.

You always want to make sure it tells you in the footer what company it is, if it is an ISO/MSP or an agent and who the acquiring bank is.  If it does not, chances are that it could be a third party processor and you won't have your own merchant identifier or the bank / company might not be located in the United States.

Verified By Visa-MasterCard Secure Code-Things You Should Know

Tuesday, April 11, 2006

Verified By Visa (VBV) and MasterCard Secure Code (MSC) are two standards that Visa and MasterCard developed to protect transactions in a card-not-present (CNP) environment.  Two benefits that Visa and MasterCard boast:

• You are not liable for fraud resulting from the unauthorized use of Visa cards.
• Fraud on your site is reduced.

However, there are things that you should know re: VBV / MSC before implementing them on your web site.  They might not reduce the fraud as one would expect.  Yes, they do help with the "I didn't do it" chargeback: it could be the reason code:

75 - Cardholder Does Not Recognize Transaction

However, if you do a lot of recurring billing, VBV / MSC will not help you with these usual chargeback:

41 - Cancelled Recurring Transaction

The reason is simple - VBV / MSC require the cardholder's authentication.  And authentication is only done on the initial charge.  All recurring charges are usually completed by the electronic payment gateway and therefore, no cardholder authorization.

You also might run into problems in which the transaction has to be re-authorized.  Some merchants pre-authorize a credit card transaction for a certain amount until they are ready to ship the merchandise.  When they are ready to ship, they do a post-authorization / sale transaction in their virtual terminal.  Usually this pre-authorization only lasts a few days, depending on the issuing bank.  So if this pre-authorization has passed, you might need to re-do the transaction.  Usually the gateway does this without you even knowing the pre-authorization has passed.  And at this point, you are not protected.

If, by chance, the transaction failed to authenticate, you are not covered.

Sales that use the "one-click buy" technologies are usually not protected either. 

Now what you need to really know is this: If the credit card is Visa, and the cardholder is not enrolled in VBV, you can still be protected (as long as the transaction is not one of the above).  However, if the cardholder is in the United States with a MasterCard and not enrolled, you are not protected.  The MasterCard cardholder in The United has to be enrolled and authenticated for you to be protected.

Some high risk accounts like adult entertainment and gambling might not be covered.  These rules vary actually per card association, so you would be best to contact your VBV / MSC vendor (not your merchant account provider / electronic payment gateway.)

Ways to Prevent Spam

Friday, April 07, 2006

I have three websites selling different items. I spoke with a merchant account agent and he told me I needed three separate merchant accounts. Why is this?

Well actually, one might do. It depends on what you are selling on all three websites. For example, if you are selling office supplies one and pet supplies on the other, make sure that your customers know your merchant name. Try to make it a little generic and not specific to one. Otherwise, you might experience a chargeback. You might also review Some Ways to Help Internet Merchants Reduce Fraud and Chargebacks.

Some merchant account providers (MAPs) consider products high risk. This varies per provider greatly. So if you were selling two products and one was high risk you would want a separate merchant account for this. This way, if something happens and you experience a lot of chargebacks and the account is terminated, you other merchant account should be fine.

A reason to have two merchant accounts is to help your accounting department. Having two merchant accounts will help them know what money is what. If you are processing over $10,000 a month for each, there is really no reason not to have more merchant accounts. At $1,000 in the United States is usually the starting point for a merchant account. Any fee less than this, I would recommend an internet payment service provider (IPSP) like 2Checkout or Paypal.

$1,000 is usually the starting point to really consider a merchant account.

Multiple Merchant Accounts

I have three websites selling different items. I spoke with a merchant account agent and he told me I needed three separate merchant accounts. Why is this?

Well actually, one might do. It depends on what you are selling on all three websites. For example, if you are selling office supplies one and pet supplies on the other, make sure that your customers know your merchant name. Try to make it a little generic and not specific to one. Otherwise, you might experience a chargeback. You might also review Some Ways to Help Internet Merchants Reduce Fraud and Chargebacks.

Some merchant account providers (MAPs) consider products high risk. This varies per provider greatly. So if you were selling two products and one was high risk you would want a separate merchant account for this. This way, if something happens and you experience a lot of chargebacks and the account is terminated, you other merchant account should be fine.

A reason to have two merchant accounts is to help your accounting department. Having two merchant accounts will help them know what money is what. If you are processing over $10,000 a month for each, there is really no reason not to have more merchant accounts. At $1,000 in the United States is usually the starting point for a merchant account. Any fee less than this, I would recommend an internet payment service provider (IPSP) like 2Checkout or Paypal.

$1,000 is usually the starting point to really consider a merchant account.

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. 

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.

With that type of base, let's say that they one 25% of of those clients in one day with one transaction.  That averages out to about 357 transactions per second.  With this type of statistic, you have to assume that at some point you are going to have problems. 

Some of the larger merchant account providers (MAPs) (Chase / Paymentech, Cardservice, First Data Merchant Services, Ipayment) boast a huge client base.  With these MAPs, 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.  The majority of these merchants use the LinkPoint gateway.  This is the same for Chase / Paymentech who First Data owns 50% in.  They processed $254,949,800,000 in 3,448,800,000 transactions and $189,782,500,000 in 3,353,300,000 transactions respectively. 

You hear a lot about Paypal and how bad they are.  One of the larger reasons is they do not check the identity of the merchant.  When it is found out that the merchant is underage or possibly selling something that is against the terms of service of Paypal, Paypal willl suspend or terminate their account.  And usually they will hold any money left in the account for 180 days in case of any chargebacks. 

Cardservice has a very lax policy in their merchants.  They will approve a lot of higher risk clients even if you are on the terminated merchant file (TMF).  They also will approve you if you are just starting out and have no processing history.  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.

One individual even created their own site because he / she was very upset with Paypal: Paypal Sucks. That same individual also created Cardservice Sucks, which goes to the same web site which leads on to believe that he / she just likes to complain.  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.