"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.