Opening a Merchant Account? Some Inside Info.

Here is a short recap of what to watch out for when opening up a merchant account:

1) Contracts

Most companies will require you to sign a contract (usually 3 yrs.). This guarantees the processor 3 yrs. of guaranteed income. They also don't have to worry about you finding their hidden surcharges, fees or perhaps the lousy customer service  they provide since it will cost you too much to leave. Be very careful if a company "claims" not to have a contract. They may simply refer to it as a "termination fee" or something else entirely simply to fool you. Unless a merchant service provider actually advertises on their site that they have "no contracts" they probably do and it's somewhere in the fine print.

2) Fees

Credit card processors have all different kind of fees for various services. Make sure they are competitive and be smart about which fees matter most to your company. Many companies will advertise a really low  rate but you may find after much digging that it only applies to debit cards.
Remember a quote is useless unless it's the actual paperwork you will sign to apply for the account it self. Companies will often give a quote  while leaving out hidden fees. They can add  them after they send you the actual contract they want to lock you into. Be Carefull!

If you don't really process a lot of credit cards (10k or less) you may find that the monthly fees a merchant service charges, is more important than the actual rate. In other words, if one provider has slightly lower rates but much higher monthly fees do the math! Usually the lower rate will cost you more as the monthly fees are eating up most of the money.

3) Reputation

If a company has a bad rating on the Better Business Bureau or you see many things written about them on web sites like Ripoff Report that should raise a red flag. Take Costco for example. They advertise low rates but things are not what they seem. Read here for more details.

Another Mobile Credit Card Processing Unit Available

Yet another credit card reader to hit the market for iPhone for mobile credit card processing:


As per TMCnet.com

We already know there are a nearly unlimited number of applications for your iPhone , iPad or iPod Touch, but the good news is that if you are a merchant or a professional who works on the road or in clients’ homes, soon you can use any of these devices as a kind of cash register. Indianapolis-based company PhoneTransact.com this week begins shipping a peripheral device for iPhones, iPads and the iPod Touch that essentially acts as a credit card reader. The reader is designed to work with the company’s existing iPhone point of sale (POS) application, iMerchantPro.

Previous to the introduction of the reader, merchants could use iMerchantPro to type in card numbers and expiration dates. With the introduction of the company’s Credit Card Reader, which attaches to the device via a dock connector, the need to type in card numbers is eliminated and merchants can process payments quickly and more easily, much the way merchants in brick-and-mortar stores use card swipe devices linked to traditional cash registers. To meet security and encryption rules, the device uses 3DES (Triple DES) encryption mandated for the electronic payments industry. iMerchantPro is compatible with almost any merchant account, features bi-directional card reading and magnetic fingerprint technology to confirm the authenticity of a credit card and meets ANSI/ISO standards. Users must have a decryption-enabled gateway.

The company identifies the new card reader and its supporting iMerchantPro software as critical for merchants who frequently work on the road at festivals, flea markets and trade shows, and for professionals who do their work in private homes such as repairmen and contractors, private tutors or home health care professionals. The solution allows payers to add tips to the total charges. And here’s an extra fun detail: in case merchants miss the old-fashioned sound of a cash register, iMerchantPro can replicate it.

In addition to processing payments, iMerchantPro allows merchants to facilitate refunds, credits, voids, e-mail receipts, GPS map-enhanced receipts, multi-business environments, sales charts and statistics, password protection, audio feedback, fraud protection and recurring billing. The solution can be installed on up to five iPhone, iPad or iPod devices at no additional cost.

The new reader is debuting at a list price of $130 and begins shipping on August 15th.

New Debit Cards Coming to Prevent Fraud: LCD Screens.

In an attempt to further prevent credit card fraud MasterCard is marching out a new generation of debit cards. These cards will feature a LCD screen and a possible 12 digit keypad.This will allow for one time passwords that should curb fraud tremendously as per the press release:

MASTERCARD and NAGRAID Security Introduce new Display Cards with Extended Features for Secure Banking Applications

NagraID Security developed a new family of MasterCard financial cards with integrated display screen allowing:

Optimized security for online transactions thanks to strong owner authentication
Display of the card balance on the card’s screen

La Chaux de Fonds, Switzerland, 10th June 2010 – NagraID Security, a subsidiary of the Kudelski Group (SIX:KUD), is pleased to announce that its families of display cards passed MasterCard’s (CSI – Card Structure & Integrity) approval process, thus demonstrating the required levels of durability, safety and compliance to ISO standards required for the commercial launch of banking cards and the introduction into MasterCard’s brand standards and rules.

The innovative Debit and Credit MasterCard Display Card looks and feels like a normal credit or debit card but comes with an additional small display and a button that enables card holders to use the same card for standard banking payment functionality and to generate second-factor one-time passwords (OTPs), thereby providing strong authentication.

The cards are very reliable and extremely simple to use. They offer optimal security to achieve banking transactions outside payment terminals using one single device.

This password generation technology complies with the requirements of MasterCard’s 3D Secure Chip Authentication Program (CAP). Optionally, a touch-sensitive keypad with twelve keys permits access to advanced functionality such as electronic signature and authentication modes, as well as to enhanced security features such as challenge-response applications and PIN code card protection.

Historically, banking institutions who protected access to their services with a One-Time Password required the use of a separate cumbersome token.

“Cards were born from cardboard, they’ve been ‘mag striped’ and ‘chipped’ and now we enter their silicon age, with an LCD display and touchpad opening up a multitude of possibilities. With NagraID’s recent achievements to demonstrate compliance to industry standards, the stage has well and truly been set to deliver the next generation consumer’s card proposition” says Eric Tomlinson, MasterCard Europe.

“This display card is designed to provide a very high level of security and reliability as well as ease of use. Users simply press a button to generate an OTP for secure access to their online services,” commented Philippe Guillaud, Executive Vice President and CTO of NagraID Security. He also added “The programmable nature of this platform makes it future proof and one can expect to see even more exciting and fantastic functionality in the near future.”

MasterCard directed promotional initiatives and large scale roll-outs will ensure that market price expectations are achieved. “As the world evolves towards increasing online and cashless transactions, the timing of our partnership with MasterCard is ideal, as it enables the growing security expectations of a rapidly expanding base of digital technology users to be quickly addressed via a secure, reliable and unified solution in a familiar and convenient form-factor.” said Cyril Lalo, President and CEO of NagraID Security.