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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:
- 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.
- 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.
- 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.
- 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.
.
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:
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. 
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