MERCHANT ACCOUNTS

Merchant Accounts are a way to make payments fast and convenient for your customers. Customers want to know that the items they want to purchase are on their way or that services they have requested are forthcoming quickly. Merchant account payments let them know that.

• As a merchant, you can check inventory electronically and then process payment instantly resulting in faster revenue posting.
• Funds should be deposited into your account in one to two days, allowing you to increase cash flow.

Forms of Payment

Merchant Accounts are available for accepting:

• Visa
  
• MasterCard
  
• American Express
  
• Discover
  
• Debit Cards

Over the last 3 years, the form of payment that most purchasers have used has changed markedly from an 80% credit card world to one in which only 60% of all purchases are made using credit cards, the remaining sales are as follows: 30% in debit cards and 10% in ACH (electronic check) items. It is important that you work with a processor who can process all forms of payment quickly and easily.

How To Process a Credit Card Transaction:

• Retail: a card swipe machine is used. The equipment for this you purchase from the merchant provider.
  
• MOTO: (card not present ie: phone or internet)
  

If over the phone, individual transactions are done using internet software, if via a call center, transactions are uploaded in batches.
If over the internet, transactions are processed in batches or directly via the gateway.

All MOTO methods use a gateway service to transport the transaction to the merchant provider.

Important Points:

1. Service
   In the Direct Response (DR) world, it is critical that your merchant provider be in sync with your media firm so that your caps are always in excess of the processing you will do. "Caps" are the amount of sales you can process on your merchant account. This number is a function of the risk of your product. You need a merchant provider who will work with you to manage this amount. Being familiar with the sales spikes of the DR industry is critical.
   Then the next step comes into place, the coordination with the call center and fulfillment center. It must work smoothly, and if difficulties arise, you must know that your payment processor is working as your partner to get it fixed.
2. Integration
   Only a fully integrated payment processor will provide you the seamless integration you want and need. Integration means that they are currently working with all the top call centers and fulfillment houses, making the passing of large files quick and easy. This makes your DR life simple. You do not want to be the test customer for a payment processor.
   
   Another element of integration is the ability to accept transactions from multiple forms. Not only over the phone via a call center, but also on line. Your merchant processor and gateway must be accustomed to transacting business this way.
3. Great Pricing
   In addition to service and integration, value pricing makes your media pay off. Every cost becomes critical.
   Discuss the costs of transaction fees, discount rates, and monthly fees with your provider.
4. Reporting
   Reporting of activity is best planned in advance of your campaign, though sometimes at the start of a merchant relationship the focus is on rates and terms, and how fast an account can be set up. When the infomercial cycle is underway, the quality of the reporting process affects your ability to evaluate your overall strategy and alter it to improve profitability. It's important to understand the status of transactions... so that you can easily balance your bank accounts and understand the status of (and reasons for) any chargebacks. The gateway and provider should have all their reports online, importable, and navigation should be straightforward. Ask about this in advance.

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How To Sign Up For A Merchant Account:

Signing up for a merchant account is fairly simple. Even so, the amount of documentation that is required and the time it takes to set up an account is a function of both the stability of your company, and the type of product you are selling.
All issuers require basic corporate information, under Visa or Patriot Act requirements, such as:

• a copy of your drivers license
• a copy of your Articles of Incorporation
  
• a voided business check
  
• an inspection of your work office or desk
  
• a sample of your product
  
• a website with your city and state (Visa requirement).
  
• a merchant application (usually online or email able).
  

Sign up costs are usually nominal.

Pricing:

Merchant account pricing can be complex because of all the elements in pricing a transaction, such as: is the card present, is this an international card, and is the address verified.

There are two basic elements followed by several levels of pricing for each element. The elements are 1) the card present and 2) the card is not present, this is called "card not present" or "MOTO" rates and result from phone or internet transactions.

Rates for each of the two options vary because of risk. Pricing usually involves a couple of factors as follows: the discount rate, an authorization fee, a settlement fee, and an AVS, address verification fee.

The discount rate can range from 1.50% and up for a card at a retail store that is present to a higher rate of 2.30% and up for MOTO cards. The discount rate is a percentage of the transaction total, such as a sale of $100 may have a discount rate, and fee, of 2.3%, therefore, the merchant will be sent $97.70 less other fees for a $100 sale.

Discount rates may be presented at a series of discount rates that need to be added up. This pricing approach is more complex and may be presented as follows: Visa interchange rate (supposed to be the rate charged directly by Visa); transaction fees, and bank fees. These fees must be added up and carefully weighed against the transaction amount in various examples to determine if the client is getting a fair deal. Things to remember in weighing options are: what is the effect of increasing average sale amounts on my cost structure and if my average sale drops, do I want a higher discount rate and a lower transaction cost to reduce my total fees.

Authorization fees are a flat fee charged on each transaction to confirm that the card and amount are acceptable. Fees usually start at $0.20 per transaction.

A settlement fee is usually a daily flat fee to close out a batch of transactions and are the same as the authorization fee.

AVS fees are usually low, starting at $0.10 per transaction. Fraud reduction items like AVS are well worth the cost.

A reserve account is an amount of money that a merchant provider may require that you set aside in case of:

• fraud
  
• charge backs
  

If you are an established business, your financial statements and past history help to establish what the risks of doing business with you are. If your product or business is new there is more risk for the merchant provider. A portion of each sale, say 20% of your sales amount, be set aside and held by the issuer to protect them against loses.