View Full Version : Merchant accounts guidance needed

12-02-2008, 10:50 AM
Hi all, hope you all having a good time here!
I am getting ready to apply for a merchant account & card processing system. Have been reading a lot of stuff & coming across a lot of companies, I guess that's what is confusing me more.
Can someone explain in brief steps how I get started on the whole process like - what are the first steps, which company is recommendable, should I go for the all-in-one package(merchant accounts & gateways), applying with companies like Card Processing Systems, Authorize.net, FirstData(does anyone recommend this company),etc.
If you could first explain in brief steps, then I could get my questions right based on those answers, which I think is the best way to understand something. Any help is much appreciated.

12-02-2008, 12:25 PM
If you are selling online, then you definitely need a gateway. It is the virtual equivelent to a swiping machine used in offline transactions.

Corey Bryant
12-02-2008, 06:19 PM
How does a merchant account get processed (http://www.mymerchantaccountblog.com/2006/02/how-does-a-credit-card-transaction-get-processed) might help you out some.

Basically you have a merchant account provider and an electronic payment gateway (Payflow, LinkPoint / YourPay / First Data Global Gateway, Quantum, Authorize.net / Cybersource). This gateway will connect to a transaction processor like First Data or Elavon. This company will then send it off to the card association (Visa / MasterCard / Discover / American Express) for authorization. And then once that is complete, it goes back to the transaction processor, gateway, to your website. First Data though might actually approve / decline the transaction if they have an association with both the issuing and acquiring banks (Visa sued them actually but settled back in 2006 (Visa USA and First Data Corporation Agree to Settle Legal Dispute (http://findarticles.com/p/articles/mi_m0EIN/is_2006_July_5/ai_n26915628) because Visa was not getting a piece of the pie).

Another company is CDGCommerce. They are an ISO (independent sales organization) so you probably won't see prices on their website. This is because they rely on agents to sell their product and agents can raise the discount rate / transaction rate some (to make more money).

It can be a bit easier getting everything from one company, but there are just a few companies that have both. Don't get confused just because you are buying both from one person - they might just be reselling both of the products.

First Data is probably the largest processor in the world. A lot of the gateways will use them as the transaction processor actually. They used to be pretty good, but ever since Cappellas took over, I have not been a big fan of them as much. I will say they are doing some interesting things though now with Paypal and Google Checkout.

When you do apply for a merchant account, you will be asked how much you will be processing per month. Of course this is pretty difficult since you are just opening, but make sure you pad this. Usually anything under $30,000 a month is easy to get - almost automatic approval. It is sometimes difficult to get this raised within the first six months of opening because the provider wants to protect itself.

(For example, if the company is not legit, chargebacks will happen. The customer will get his money back from the issuing bank. The issuing bank will get his money back from the acquiring bank. The acquiring bank will get their money back from the merchant account provider. And if the customer is not around, the merchant account provider is out of luck.) Now I am not saying you are not legit, but trying to give you a perspective on everything.

They will probably also ask you what will be your highest ticket item. Another guess - but try to be pretty honest here. They will judge your average ticket transaction with this and your monthly volume. If you do happen to process a transaction higher than what you put into the contract, call the provider to let them know. Sometimes, they might put a hold on that transaction just to verify it is legitimate.

12-02-2008, 07:10 PM
Corey, you are the first person I thought about when I saw this question. Your timing is impeccable so I'm glad to see you here.

Corey Bryant
12-03-2008, 10:44 AM
Thanks Steve! It was just a fluke that I decided to start checking in on this forum. Hopefully I answered a few of the OP's questions (probably created more though :) )

12-14-2008, 12:28 AM
Thanks Corey! That was really informative. So would you still recommend FirstData. And you mentioned some interesting things they have been doing with paypal & google checkout, do you know what sort?
And for a merchant account, I could also apply it with the bank that I have account with, right? - like HSBC.

Corey Bryant
12-14-2008, 10:48 AM
The reason they have the Paypal / Google Checkout option is because those companies use First Data's transaction platform to help process the transaction. It was common sense for them to add them, but I think First Data was waiting on Google Checkout to complete their PCI compliancy first

Of course using a large company there are some of the problems that come with that - I have called them (and other corporations when dealing with their customer service from time to time) moronic corporate imbeciles. Most of the time, they read what is in front of them, not thinking anything else. So that can get frustration at times. For the most part though, you never have to deal with them unless a deposit was not made in time, etc. Usually when this happens, you can bet your bottom dollar they already know, have initiated a bridge for the appropriate people to see where the problem lies.

You usually get your merchant account (and this is true with almost any ISO) via an agent. The ISOs rely on the agent to sell the account. Some agents, once they sell the account, they don't want anything else to do with you. Some other agents though, they will try to work with you and see if they can help get an appropriate response. And most ISOs will not post their prices on the site because some agents might want to raise those prices.

For example, I think it was about twp year ago, the standard discount rate was about 2.34% - which was raised from an average of 1.99%-2.09%. The agents were finding it more difficult to sell with this higher rate so a lot of them went back to 2.19%. There is always of course some wiggle room in there, but if you are a member of Sam's Club or Costco, you can look at their rates as well. Most agents will tell you just to use them and won't try for your business unless you are doing a decent amount of volume per month to justify the lower discount rate.

I don't recommend getting the merchant account from the bank you do business with. I am not too familiar with HSBC's policies, but I know that with Bank of America if you get a merchant account with them and later start to have problems with the merchant account (too many chargebacks, etc) that BofA will suspend / terminate your merchant account and your bank account. As you can imagine, not having access to your bank account will cause you a lot of problems. Plus, so many banks outsource the Internet merchant account to merchant account providers because the banks don't want to deal with it.

12-22-2008, 05:54 AM
Thanks corey. I will look into those. On a related note, is it advisable to open a bank account in a different state than the one you are doing business in or does it even matter that your business account & bank account are in the same states or not. Any insights on this.

Corey Bryant
12-24-2008, 01:12 PM
For opening the bank account in another state, I don't think that matters as far as the merchant account goes. For tax purposes, that is a different matter - one that I really do not know anything about. Accounting and Taxes (http://www.small-business-forum.net/accounting-taxes/) might help some

01-08-2009, 09:45 AM
Hello again corey
Still have a couple of more - say if I wished to accept payments on my website worldwide,i.e, international credit cards - which one in your opinion would be better - First Data or something like World Pay.

And not sure if a question like this is relevant but - would there be any one US bank that can be regarded as a bank that is more favorable to Ecommerce business?

01-09-2009, 06:44 AM
And has anyone dealt with or heard of Sage Payment solutions for merchant accounts. Suggestions? Thanks.

Corey Bryant
01-13-2009, 05:31 PM
As far as accepting payments worldwide, there is not really a difference as far as consumers are concerned. It matters where the merchant is. Some processors will charge a non-qualified rate for some transactions depending on the country and issuing bank (never really figured out exactly how it works, saw a transaction from a consumer in Russia and the transaction was qualified). The non-qual rate is usually higher and is charged because Address Verification Service (AVS) cannot be complete on the transaction. This is the basic / start of vetting the transaction.

If you think you are going to have a lot of transactions from users not in the United States, you might look into VBV / MSC. This also helps you into accepting Maestro card brands as well. First Data also has an option that they will add PayPal / Google Checkout as well to your account if requested.

As far as merchant accounts, it used to be that you mainly got them from the bank. Heck, I remember depositing the signed copies from the knuckle-busters long ago. Now, a lot of banks outsource this to other companies (like First Data). The other big players is Chase / Paymentech and Nova / Elavon.

Another company is CDGCommerce - they are a merchant account provider. They will also work with you while you work with them. Communication is the key in the transactions. If you get a large transaction that is above what you thought you might get, contact the provider to let them know. They might want to vet the transaction as well. Remember it is their (merchant account provider) money before it is yours and they want to protect themselves just as much.

01-17-2009, 11:48 AM
Just one comment as Corey really outlined the ins and outs. My expeience is that it is better have your merchant processor and your bank be one in the same. I say this from a cash flow perspective. Usually, if they are the same, you will receive your funds a day or two faster then through a third party.

Now having said that, I haven't heard of any problems like account suspension. If this is a real problem, might contact your bank and read their fine print.