Thursday, August 26, 2010

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.

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