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Frequently Asked Questions

What should I look for in a Merchant Services provider?

There are a lot of 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.

Learn more about finding the best merchant services provider

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 it could be inevitable 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 you will have to pay.

So, do yourself a favor and take a look at the overall 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 ask questions.

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.

Most banks focus on driving in deposits and handing out loans and merchant services is an afterthought. Most sales representatives in this arena will only have basic knowledge and 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.

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. Again, it is important to ask a lot of questions and not blindly go with a processor simply because a group you are associated with made the recommendation. Also, many of these partner agreements give revenue streams back to the association who referred the merchant services provider.

A wide range of companies fall into this category, from extremely professional and knowledgeable organizations to fast-talking car salesmen who you will never hear from again after signing the agreement. ISOs provide many different offers, such as free terminals and low introductory offers. Make sure to ask yourself if you feel the sales representative is getting to know your business and presenting solutions that will be good for your business rather than they seem focused on price only and how much they will save you. Tips on finding the right ISO for you

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 this is your sales representative, but it could also be a relationship manager. Be cautious if a company cannot offer your business support during your business hours. Remember, merchant services are a way for you to receive payment, and if your service is down, you will need access to customer support.

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, such as Pin Based Debit, Check Processing or Gift Cards. In some cases, older equipment cannot support some or all of the additional services.

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 cannot be canceled. This means that you are obligated for the full term of the lease. However, leases can usually be transferred, but you should check with your leasing company to make sure. 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. When you lease, you have the ability to upgrade equipment when new technology comes out. It is also important to find out the buyout options and understand them too. Check with your accountant or CPA on the tax benefits of leasing.

Purchase: When you buy equipment, you usually spend less money overall compared to leasing. Equipment is generally treated as customer-owned after one year of ownership.

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

This is also depends on the situation and is more of a personal decision for you. 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 does not take the download and needs to be replaced.

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.

In addition, be careful if you are getting a new terminal or a refurbished terminal. You should keep in mind what the warranty is if the terminal is defective and what the return policy is.

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 charge you additional fees. Remember, nothing is actually free, so in a situation like this, you will probably just pay for the terminal differently. Most of the time, this is a marketing concept to get merchants to sign with a 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.

How do 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. Several factors affect what the interchange rate will be. Some include the type of merchant, cost of sale, payment product type and 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 online) affects the interchange rate and processing requirements.

Who pays interchange?

The merchant services provider generally pays interchange. Merchants make a payment to their acquirer for credit card transactions, which is 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 credit card company that issues their credit card.

Can merchants negotiate interchange rates?

Merchant do not pay interchange directly. Instead, they pay a discount rate that they can actively negotiate 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 cardholders.

How much revenue does my merchant services provider gain from interchange?

In short, a merchant services provider makes zero revenue on 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.

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.).

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, cardholder name and expiration date as well as customer signature. In addition, other anti-fraud measures that merchants should check include the Flying Dove hologram, which is 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 the process of ensuring cardholder information is protected immediately.

What should I look for to spot fraud by a cardholder?

Watch out for customers who:

  • Purchase a lot of merchandise without any regard to size, color, or price.
  • Do not ask questions on major purchases.
  • Try to distract or rush you during a sale.
  • Makes a purchase and leaves the store only to return to make another purchase.
  • Make large purchases right when the store opens or closes.
  • Refuses free delivery for large items.

Certain customer behavior could indicate possible fraud, but remember it does not necessarily mean any criminal activity is taking place. You know your customers, so let your instincts steer you in the right direction.

What should I do if I suspect fraud?

Try to hold on to the customer’s card if possible, follow your company’s procedures and notify the authorities. You should also 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 are copy requests and chargebacks?

Copy Request: Also known as a retrieval request, a copy 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: A chargeback is when a card issuer receives a refund on a particular transaction – made by a cardholder – from a merchant. So, if a cardholder makes a purchase, but then wants a refund, this person would go to his or her credit card company and the credit card company would contact the merchant to ask for a chargeback. Often times, the reason for requesting a chargeback has to do with fraudulent activity on the card, but not always. 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 as well as incur your own internal handling costs to process a chargeback.

How can I prevent chargebacks?

Consider the following tips when trying 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 the cardholder’s 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 the 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 that there is a delay and state the new expected delivery or service date.
  • If the merchandise ordered by the cardholder is out of stock, and their delivery will be delayed or the 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.