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How-To: Shop for a Merchant Account Provider- Part I

September 17th, 2008

Finding it hard to know where to start when it comes to shopping for a merchant service company? You aren’t alone. That is why we are going to start what will become a very long series—if not an entire book—of detailed information on how to shop for a credit card processor.

Remember, the whole goal of What Every Merchant Should Know is to educate you.  We want you to shop and process smart.

So the first part of shopping for a merchant account is knowing where to get one; right?  In part I, we’re going to focus on banks because Banks are often the first place that comes to mind when you think of a merchant account.  While most banks offer merchant accounts there are several things you should know before signing on the dotted line.

It’s important you understand what their relationship to your merchant account is?  There are only a few possible answers here and they each have their own ups and downs.

  1. The bank owns a processor who is a separate entity.For example, US Bank owns Elavon (formerly NOVA Information Systems), Chase has ownership in Paymentech, etc.  You would think this is a good thing—and sometimes… just sometimes it is.  I’ll explain.The first thing you want to know is who is going to sign you up and answer your questions?  Is it just a desk clerk?  Do they REALLY have an understanding of the intricate details of the merchant service industry—or are they more of a banking generalist?  Or, are you going to get passed off to the “merchant account specialist” that is employed by the bank?  Either way, how long have they been with the bank?  How long will they continue to be with the bank? How long have they been focused on merchant services?  You should ask what their motivation to SERVICE your account AFTER they sign you up is?  Do they earn ongoing revenues from your account—not from banking fees, but from the merchant account itself (the answer you’re looking for is yes!)?The bottom line here is; who are you going to deal with before the sale and more importantly AFTER the sale?  If you just get a toll free number to a help desk in some other state or some other country—CALL IT!  Make sure you can live with the hold time.  Talk to the person who answers for a minute to see if they appear knowledgeable and interested in helping you.  Ask how long they have been with the company.  BELIEVE ME–if you have never accepted credit cards before or have always been happy with the company you’re with, you do not have a true appreciation for how important the level of service you receive after you’re on board truly is.
    This type of relationship is not often found within a large bank, which means there will likely be little, if any personal attention.  You will truly be just a number.
  2. The bank is a registered ISO with Visa/MasterCard, but someone else does the actual processing.If the merchant application has the banks name on it, this could be what you’re up against.  This setup also has its pluses and minuses.  Again—who is going to provide you with service?  What control does the bank have over your account as it relates to price increases?  For that matter, what control do they have over your general satisfaction?  Sometimes banks take this step just so they can earn a larger share of the revenue from their processing partner, but really all they do is sign up the account and then it’s hands off from there.
  3. The bank has partnered with a third party merchant services specialist. In my opinion, this is the best option.  This too can have some pitfalls though, so you have to ask the right questions.  More specifically:
  4. •    How long has the bank been referring clients to this company?
    •    Have they received any complaints?
    •    How many companies did they research before choosing one?
    •    What was their reason for selecting the one they did?
    •    Do they (the bank) receive compensation for referring you?
    •    If so, is it in the capacity of a onetime referral bonus or long-term residuals?

Come back same time next week for Part II and find out the biggest mistake many people make when they think—“I’ll just use my bank.”

Entry Filed under: Advice,How To: Shopping

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