Choosing the Right Merchant Services Provider

Questions to ask yourself when looking for a merchant service provider. Not all providers are created equal and many have hidden fees and large cancellation charges. So we have put a list of questions together you should be armed with.

Point of Sales Frequently Asked Questions

Questions many merchants are asking themselves around point of sale equipment. How do I know I am not being sold too much technology or not enough for my business, or do I even need to upgrade my equipment?

Questions on Interchange and Pricing

Questions on the most confusing part of Merchant Services. What rate am I really paying, and what can I do to reduce my costs at the Point of Sale?

Questions on Fraud and Chargebacks

Questions on how to protect your business from chargebacks and fraud. Securely processing transactions could save your business thousands of dollars per year.

Choosing the Right Merchant Services Provider

We try to anticipate questions you might have about finding a merchant service provider and provide the answers here. If you need additional information, send an email to info@mproexp.com.

1. What should I look for in a Merchant Services provider?

   There are a lot of very good providers in the industry. Here is a list of several things we feel are essential in choosing a merchant services provider.

   • They ask you a lot of questions about your business and how you are going to accept payments.
   • They are willing to go in detail on how they will bill all types of transactions, not just the low published rate they are offering.
   • They will talk to you about much more than rates and fees.
   • They are willing to work at your pace for set-up and will provide you with important training on how to process a credit card and protect your business against fraud and chargebacks.
   • They clearly explain all terms and fees on your fee schedule, purchase agreement, and/or Lease Agreement.

2. Should I pay a Set-up Fee?

   This can go either way, of course no one wants to pay a set-up or reprogramming fee, but depending on your set-up it could be required due to the additional time and training it may require to get your business set-up correctly. I would not solely base my decision on a Merchant Services provider on set up fees alone. Many companies advertise “No Set Up Fees”, but have other hidden fees not disclosed that you will pay.

   So in conclusion, take a look at the over all program. Has your prospective provider clearly explained all fees? Do you feel the expected training and services you will receive is worth the prospective set up costs? Finally, be smart and take your time in asking a lot of good questions.

3. What is the difference between my bank and an independent processing company?

   Most transactions that take place in the industry happen on one of a few processing platforms, and most financial institutions do not process the transactions themselves. They use a third party network. Here are a few things to think about.

   Banks

   Most banks focus on driving in deposits and handing out loans and Merchant Services is an after thought. Most sales representatives in this arena will have a base knowledge and will be locked into a few pricing options, which makes it difficult for them to customize the right program for your business. However, many will be able to offer faster funding times due to clearing and funding the transaction in the same financial institution.

   Associations

   Some associations and trade organizations may recommend a processor to you that they have negotiated a deal with. Some of these deals can be extremely good for your business, and others may not be so good. It is important again to ask a lot of questions and not blindly go with a processor simply because it was recommended by a group you are associated with. Also, many of these partner agreements give revenue streams back to the association for members they have referred to the merchant services provider.

   ISO

   A wide range of companies fall into this category, from extremely professional and knowledgeable organizations to the fast talking car salesman who you will never hear from again after signing the agreement. ISOs have a wide range of offers from free terminals to low introductory offers. Again, stop and ask yourself if you feel the sales representative is getting to know your business and offering solutions that will be good for your business, or do they seem focused on price only and how much they will save you.

4. What other services should a merchant services provider offer me?

   A merchant services provider should offer you online reporting tools, 24 hour help desks for customer service and terminal or technical help desk, periodic merchant service reviews, and access to an assigned person that knows your account; usually that is your sales representative, but could be a relationship manager. Be very careful of a company that can not offer your business support during your business hours. Remember, merchant services is a way for you to receive payment, and if your service is down, you will need access to support.

Point of Sales Frequently Asked Questions

We try to anticipate questions you might have about our Point of Sale equipment and provide the answers here. If you need additional information on equipment send an email to info@mproexp.com.

1. Can I reprogram my terminal without buying new equipment?

   Generally the answer is yes you can reprogram your current equipment unless you have extremely antiquated equipment. However, you may be looking to add additional services like Pin Based Debit, Check Processing, or Gift Cards. In some cases older equipment can not support some or all of the additional services.

2. Should I Lease or Purchase equipment?

   This is a personal decision based on the financial position of your company as well as what type of business you are running. Here are some general thoughts:

   Lease

   • Most if not all leases are non-cancelable. This means you are obligated for the full term of the lease regardless of the status of your lease. Leases can usually be transferred, but check with your leasing company.
   • Leases offer you the ability to defer payments over a term and keep needed capital in inventory where you can turn a profit, instead of investing in equipment that will depreciate over time.
   • Leases usually come with a free replacement program if your terminal is defective for the full term of the lease.
   • It is important to find out the buyout options and understand them too. Check with your accountant or CPA on the tax benefits of leasing.
   • Ability to upgrade equipment when new technology comes out.

   Purchase:

   • Lower overall cost than leasing generally.
   • Equipment is generally treated as customer owned after one year of ownership.

3. Should I buy a terminal online and save myself some money?

   Personal decision again. You can find some very good deals online if you know what you are looking for. Check with your prospective or current processor and find out how they will handle programming the terminal. Also, find out what will happen if the terminal doesn't take the download and needs to be replaced.

   Also, be cautious if you are getting a new terminal or a refurbished terminal. What is the warranty if the terminal is defective and what is their return policy if you should change your mind.

   Generally, your current processor will be able to offer competitively priced equipment with better warranties than you will find online. You also know you are getting new equipment and not a terminal that is refurbished.

4. A Processor is offering me a free terminal when I sign up, is this a good deal?

   It could be, but in many cases the processor will have additional fees you will pay in order to get that terminal. Remember nothing is free, just a different way of paying for it. Mostly this is a marketing concept to get merchants to sign with their service. Other processors may have increased cancellation fees to have you pay for the terminal upon leaving the company.

   In general, take a look at the total cost of the service and equipment. Look at the information and/or services your sales representative is offering you. Take your time and make an educated decision.

Frequently Asked Questions on Interchange and Pricing

We try to anticipate questions you might have about our interchange and pricing and provide the answers here. If you need additional information send an email to info@mproexp.com.

1. How does Visa® and MasterCard® set Interchange?

   Interchange is set in response to dynamic and highly competitive market forces and strikes the right economic balance between participants in the payment network. Among other things, it varies by the type of merchant, cost of sale, payment product type, processing technology the merchant uses.

    

   For example, transactions at fuel merchants, quick service restaurants and car rental agencies each possess unique attributes that require different interchange categories and processing strategies. Similarly, the type of payment product used (e.g., face-to-face or over the Internet) affect the interchange rate and processing requirements.

2. Who pays Interchange?

   The merchant services provider generally pays interchange. Merchants make a payment to their acquirer for credit card transactions, frequently referred to as a discount rate. This is a market-based fee set by each merchant services provider operating in a competitive marketplace. Merchants can choose their merchant services provider in the same way cardholders can choose the card issuer that issues their credit card. Interchange is only one component of the cost of doing business.

3. Can merchants negotiate Interchange rates?

   Merchant do not pay interchange directly. They pay a discount rate that they can actively negotiate directly with their merchant service provider. Interchange is a mechanism that helps manage a worldwide system made up of thousands of merchant services providers and issuers, as well as millions of merchants and card holders.

4. How much revenue does my merchant services provider gain from Interchange?

   Interchange is the transfer rate paid by the merchant services provider to the card issuer for the vast majority of transactions. For ATM transactions, interchange flows in the opposite direction, from the card issuer's bank to the acquiring bank. It is part of the financial institutions cost structure.

   So the Merchant Services provider makes zero revenue on Interchange!

5. Should I always go for the lowest rate my provider will offer?

   On the surface it makes sense to get the lowest processing fee one can negotiate. However, merchant services providers have ways of increasing your effective rate through non-qualified transactions. The best way to negotiate your discount rate is to look at the effective rate. This is the rate you pay based on the total fees divided by what was processed. It is not uncommon for a merchant to switch for a lower rate and end up paying more in total fees.

   This is why it is extremely important to have a sales representative that clearly answers all your questions and goes over your fee schedule in detail. Take your time and understand the pricing structure and how your provider will charge you for all types of cards (credit, debit, reward, world, purchase, business, hand keyed, swiped, etc…).

Frequently Asked Questions on Fraud and Chargebacks

We try to anticipate questions you might have about our fraud and chargebacks and provide the answers here. If you need additional information send an email to info@mproexp.com.

1. What can I do to reduce fraud losses?

   • At the point of sale, the merchant has responsibility for checking over the physical aspects of the card, including the embossed account number, the cardholder name and expiration date and customer signature. In addition, other anti-fraud measures that merchants should check include the Flying Dove hologram, the ultra-sensitive dove that is visible when the card is placed under ultraviolet light, and the “Flying V” embossed security character.
   • Merchants should contact their merchant services provider to better determine what additional services could be deployed to reduce fraud and manage chargebacks. From Verified by Visa to CVV2, merchants have sophisticated technologies at their disposal to reduce fraud losses.
   • Review the PCI data security requirements and begin immediately the process of ensuring cardholder information is protected.

     What should I look for to spot fraud by a card holder?

     Watch out for customers who:

     • Purchase a lot of merchandise without regard to size, color, or price.
     • Ask no questions on major purchases.
     • Try to distract or rush you during a sale.
     • Make purchases, leaves the store, and returns to make more purchases.
     • Make large purchases right at opening or at the last minute when the store is closing.
     • Refuses free delivery for large items.
     • Certain customer behavior could point to fraud, but remember it does not necessarily indicate criminal activity. You know your customers so let your instincts steer you in the right direction.

     What should I do if I suspect fraud?

     • Hold on to the customer’s card if you think you can do it safely.
     • Follow your company’s procedures and notify the authorities.
     • Call your voice authorization center and request a “Code 10” authorization, using a normal tone of voice and an operator will tell you what to do.
     • Never risk your own safety or the safety of others in the vicinity!

   What is a copy request and a chargeback?

   Copy Request

   Also known as a retrieval request is made by the card issuer to your merchant services provider when a copy of the sales receipt is needed for a particular transaction.

   Chargeback

   The reversal of the dollar value (financial liability), in whole or in part, of a particular transaction by the card issuer to the merchant services provider, and usually, by the merchant bank to the merchant. For the merchant business, chargebacks can be costly. You may lose both the dollar amount of the transaction being charged back and the related merchandise. You also incur your own internal handling costs to process a chargeback.

   How can I prevent chargebacks?

   Consider the following tips to prevent chargebacks.

   • Do not complete a transaction if the authorization request was declined. Do not repeat the authorization request after receiving a decline.
   • If you receive a “Call” message in response to an authorization request, call your authorization center.
   • Make an imprint for all card-present transactions.
   • Obtain cardholder signature. Make only one imprint of the card for each transaction.
   • Ensure that transactions are entered into point-of-sale terminals only once and deposited only once.
   • Ensure that incorrect sale receipts are voided and that transactions are processed only once.
   • If your establishment has policies regarding merchandise returns, refunds, or service cancellation, disclose these policies to the cardholder at the time of the transaction.
   • Deposit sales receipts with your merchant bank as quickly as possible, preferably within one to five days of the transaction date—do not hold on to them.
   • Deposit credit receipts with your acquirer as quickly as possible, preferably the same day as the credit transaction is generated.
   • If a customer requests cancellation of a recurring transaction which is billed periodically (monthly, quarterly, annually), always respond to the request and cancel the transaction immediately or as specified by the customer.
   • Keep customers informed on the status of their transactions.
   • If the merchandise or service to be provided to the cardholder will be delayed, advise the cardholder in writing of the delay and the new expected delivery or service date.
   • If the merchandise ordered by the cardholder is out of stock and delivery will be delayed or this item is no longer available, advise the cardholder in writing and offer the cardholder the option of purchasing a similar item or canceling the transaction.
   • Ship merchandise before depositing transaction.