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Merchant Accounts
"There is no such thing as a free lunch." Remember hearing this phrase when you were growing up? While the internet has certainly changed the way we live and conduct our business, there are some rules of business that have not changed. One rule is to be cautious when the offer looks "too good to be true." Another rule is that you should not engage with companies that use deceptive practices to win your business. Here are some of the practices you need to watch out for:

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As you gather information from Merchant Account Providers, you will likely find Providers luring you with "everything is free" type offers. If you call these Providers and start asking questions about what fees will appear on your monthly statements, you will quickly see that everything is NOT free. While starting a merchant account can be fairly quick & easy for you, the reliable Providers are expending significant resources to get you up and running. They must recover the costs for software engineering and hardware depreciation just like any other business. If they say start-up is free, they have to recover the costs elsewhere in higher discount rates and/or transaction fees. As an astute business owner you should know the old saying: "There is no such thing as a free lunch." The same applies here.


Suspiciously Low Discount Rates & Fees

Be careful about entering into a Merchant Agreement with a company based on rates & fees alone. Some Providers offer a really low discount rate to start and begin bumping it up a few months after you have enrolled in the program. Others make it up in surprise fees - ouch! Sometimes calling tech support is like playing Russian Roulette - on first shift you get fully capable support, and second shift it's total incompetence.

If the Provider's rates & fees are significantly lower than the others you should ask for references. Make sure to read the back of the Merchant Agreement before you sign and see if they have expensive exit penalties. If the provider's rates are really that low, why do they need an unfair exit penalty to retain customers? Did you know that every 0.1% difference in discount rate translates to only $1 per month for every $1,000 of orders processed? How much is reliable tech support worth to the success of your business? Again, ask for the customer service number and call it a few times to see how long you get put on hold. Ask if that really low discount rate is guaranteed in writing and if so, for how long.

Remember - many Merchant Account Providers and Third Party Processors will offer a "great deal" on discount rates and fees only to make it up later by raising your rates and fees a few months down the line. History proves these to be "bait and switch" tactics. Don't take the bait.

Using Smoke & Mirrors on the Merchant Account Application

Have you noticed that some merchants are easier to get approved for a Merchant Accounts than others? Merchants who sell risk-sensitive products such as multilevel marketing, pyramid schemes, sexually oriented materials, military firearms, and pyrotechnic devices are harder to get approved - especially when they are not honest up front. If you are in this type of business you may have some trouble getting approval the proper way. Yet, you know there are companies online selling sexually oriented products while accepting Visa, MasterCard and American Express. How are they able to do this?

There are Merchant Account Providers who accommodate these types of businesses the right way and the wrong way. Remember that sales rep in the Introduction to this Guide that used different wording on the application to hide what the company really did in order to get the Merchant Account Application approved more quickly? It gets worse. While this may help the merchant get started in the short term, this could have devastating effects in the long term. As soon as there is a problem with a chargeback or cancelled order the processing bank will find out and your merchant account will be closed.Your funds will be frozen until the bank believes it is safe to release them. Also, you may end up on the Visa Certified Terminated Merchants File (CTMF) which means you may never be approved for another Merchant Account. If your funds are frozen, you could lose your business. While smoke and mirrors work well for magicians, your sales rep should not be using this type of magic on your merchant account application. If he is, find a new sales rep and a reputable company. Your approval process may take a little longer but your business will not be destroyed. The risk of a "too quick" approval is too high.

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