Maintaining Your Merchant Account

This section explains one of the most important and most often overlooked aspects of credit card processing, which is how to maintain your merchant account. Many business people expend a lot of time and energy researching different types of merchant accounts and merchant service providers in order to find the best merchant account for their business.

Once you find the best provider for your business and open a merchant account, don't stop paying attention. Bankcard processing is a financial industry that changes over time. Rates and fees on the account may change over time, the rules and processing regulations can be updated, and even processing equipment can become outdated. By the time you get around to looking at your merchant account again, you'll realize that you've been overpaying for months or even years. Even the best merchant account will degrade over time. It's not the provider's fault, that's just the way merchant processing works.

When a merchant account is left unattended for a period of time rates and fees can rise, the card associations (VISA & MasterCard) can release new regulations, and other things can happen that affect the account. We call this process merchant account degradation. Once a merchant account degrades you have two options. You can go searching for a new merchant account or you can contact your existing provider and request that they lower your rates and fees back to a competitive level.

The key is to not let your merchant account degrade in the first place. By staying on top of your account you will save time and money. The following section will explain steps that you can take to easily maintain your merchant account.

More accurately, read and understand your merchant account statement every month. Reading your merchant service statement every month is one of the simplest and most important things that you can do to make sure that your merchant account stays competitive. At first it may seem like a degree is required to decipher the charges on a merchant service statement, but it's really not that difficult once you get the hang of it. If you have merchant account questions, contact your provider and ask a representative to thoroughly explain them.

Important Notices Section
Your merchant service provider can't legally change anything about your merchant account without telling you in advance. Most providers and banks require that you be notified of any changes to your account at least 30 days prior to changes taking affect. These notifications will be prominently posted on the first page of your merchant account statement in a section called, "Important Reminders", "Important Updates", or something similar. It's absolutely crucial for you to read this section of your merchant account statement every month. It's in this section that your merchant service provider will notify you of rate increases or changes to regulations that govern your account. By reading about these changes in advance you will have to time to act upon them before they actually take effect.

Verify Discount Processing Rates
You know from reading this guide that there are as many as three different discount rates, and sometimes more, that you may be charged to process credit card transactions. Many different variables can affect how a transaction will be charged and whether the transaction will be charged at the qualified, mid-qualified, or non-qualified rate. Once you open a merchant account, look at your merchant processing statement each month to make sure that the majority of your transactions are running through at the qualified (lowest) rate.

VISA and MasterCard often release security updates and regulations that can affect the way your merchant account and credit card machine are required to function. Sometimes these changes will require that you to contact your provider in order to have your credit card machine reprogrammed so that it's able to function properly and comply with any new rules and regulations. Many times these changes will be required in order for your transactions to run at the qualified rate. If you notice a large increase in mid or non-qualified transactions in any given month, you should contact your provider as soon as possible to inquire why things have changed.

Corporate credit cards, travel cards, rewards cards, and other non-standard cards, are all subject to downgrading to mid or non-qualified discount rates. Depending on the relationship that your merchant service provider has with their acquirer or processing bank, it may be possible for them to manipulate how these card types are charged. It's possible for these changes to be made with or without prior notification to you. This is another important reason to keep a watchful eye on how the majority of your credit card transactions are qualifying.

Dealing with and combating credit card chargebacks and fraud are two very involved topics that every business needs to take seriously. This section will cover the basic points about chargebacks and common forms of credit card fraud and how to deal with and prevent each one. There are tons of valuable resources available to combat fraud and chargebacks at VISA and MasterCard's websites.

Chargeback
A chargeback happens when a customer contacts their issuing bank to dispute a charge applied to their account. The issuing bank will reverse the charge by debiting the acquiring bank, which in-turn debits the account of the merchant that placed the charge. A chargeback is most common with card-not-present business types such as mail order and online businesses.

When a chargeback is issued the processor will notify you by sending a chargeback notification via the postal service. The chargeback notification will inform you of the transaction that is being disputed and the reason the customer gave for the dispute. From this point you have a period of time to settle the dispute with the customer or respond to the processor or acquiring bank with paperwork and proof that supports the charge. You will usually only be given a few days to respond with supporting documentation.

Easily Recognizable doing business as (DBA) Name - The DBA name of your business is the name that a customer sees on their credit card statement. One of the most common reasons why customers issue chargebacks is because they don't recognize a charge on their credit card statement. Instead of doing research to figure out where the charge is from, most customers will issue a chargeback.

The easiest solution to this problem is to make sure that your DBA is easily associated with your business so that your customers immediately recognize your charge on their credit card statement. Online businesses seem to have the most problem in this area. People often expect to see the name of the website that they ordered from on their credit card statement and when they see the actual business name they fail to recognize who the charge is from and subsequently issue a chargeback.

For example, an online business that has a corporate name of DEF Incorporated may sell products through their website located at ABC.com. If their DBA name shows on their customer's credit card statements as DEF Incorporated, the customer will have no way of knowing that the company is connected to the website ABC.com and they may issue a chargeback. Online businesses should strongly consider using their website address as their DBA name to avoid chargebacks due to customers not recognizing the business name on their statement.

Statement Name Notification - Another way to combat chargebacks due to an unrecognized DBA is to notify your customers of how the business name will appear on their credit card statements. Something as simple as a sign that says, "Please note that this charge will appear on your credit card statement as YOUR BUSINESS NAME HERE" will help to reduce chargebacks due to an unrecognized DBA. It's best to prominently display a notification like this directly on a customer's credit card receipt in the case of retail businesses, on the checkout or receipt page for online businesses, and directly on the catalog order page for mail order businesses.

Document Sales - The more thoroughly documented a sale is the less likely a customer will be to issue a chargeback, and the less likely the customer will be to win a chargeback dispute should they issue one. Unfortunately, some consumers have become wise to the chargeback system and they issue chargebacks against legitimate transactions in the hopes that they will get a free product or service. If you take extra care to document your sales these types of customers will often not bother to issue a chargeback against you because they know it will not stand. If the customer does issue the chargeback, you will be able to supply the processor with documentation supporting the sale and ultimately have the chargeback overturned.

Documenting sales is very easy once you become organized. For card present businesses documenting a sale is as simple as saving the original credit card receipt that the customer signs. A signed receipt and a simple explanation are usually enough to win a chargeback dispute. For card-not-present business types documenting sales is a little more involved. Card-not-present businesses must take extra care to document their transactions. A customer usually has as long as 180 days to issue a chargeback and sales documentation should be saved for the same amount of time. Print out and file each order and require signature deliveries for large volume orders that can be used as proof of delivery.

Contact the Customer - If you receive a chargeback notification from your processor, the first thing that you should do is contact the customer to try and resolved the chargeback directly with them. As we will explain in a moment, this is the cheapest and easiest way to resolve a chargeback dispute. In many cases, once you identify your business and explain why you had made a charge, the customer will realize they've made a mistake and they will contact their issuing bank to withdraw the chargeback claim.

Chargeback Fee - If you fail to dispute a chargeback in the time allotted, or you lose the chargeback dispute, your account will be assessed a chargeback fee in addition to having the original amount of the disputed transaction deducted from your bank account.

Retrieval Fee - Your account will be assessed a retrieval fee if you respond to a processor's request for information to defend yourself against a chargeback. A retrieval fee is like a processor's handling fee to deal with any information that you send back to support your original charge. If you are able to resolve a chargeback dispute directly with a customer your account will not be assessed a chargeback fee and you will not need to send information back to the processor therefore avoiding the retrieval fee.

Many business people don't communicate with their provider. As soon as they're unhappy about something they look for a new merchant account instead of trying to work with their existing provider. If you are generally happy with your provider but feel that your rates and fees are too high, communicate with your provider via the merchant message board to address your concerns. If you still can't reach an agreement, you should begin searching for a new provider.

The bank card processing industry is very competitive and providers don't want to lose customers. You will often find that providers are happy to work with you in order to keep your business, even if that means lowering your rates and fees. If you are approached by another merchant service provider who is claiming to offering lower rates and fees you should ask that provider to submit their offer to you in writing so that it will be documented and you'll be protected.

Call About Rates Increases - By watching your monthly credit card statements you will be informed of rate and fee increases before they actually take effect. When you're notified about increases, contact your provider via the merchant message board to see if there's anything they can do to minimize the increase to your account. If the rate increase is a result of an interchange increase from VISA and MasterCard there may be little that your provider can do, but in most cases they will work with you to minimize the increase to your account.