How to Get the Best Merchant Account Services

Every business owner wants the best merchant account with the good rates, great customer service and added features and benefits. The problem is that there's no provider that can offer the perfect account to every business that asks for a merchant account quote. Providers may claim 100% satisfaction, but as the saying goes, "You can't please all the people all the time" and the same is true with merchant accounts. The definition of the perfect merchant account is different for every business.

When you set out to find the best merchant account for your business, don't expect to stumble upon the perfect pre-packaged account from the first provider that you approach. Getting a great account takes a little work, but given the importance of a merchant account - the work is well justified. In this article I'll outline steps that you can follow to find the ideal merchant account for your business.

Another valuable pointer when searching for the best merchant account is to look for a type of account - not a specific provider. Of course customer service, support and similar aspects of a provider are important, but individual providers are able to offer various pricing structures. It's the type of pricing that will make or break a merchant account. As we'll talk about next - certain merchant account pricing models are less expensive and more transparent than others.

The Best Pricing Structure

The most common merchant account pricing structures are a tiered, interchange-plus pricing, enhanced recover reduced (ERR) and flat rate credit card processing. Interchange plus and flat rate pricing is better, less expensive and easier to compare than tiered or ERR merchant account pricing strucutures.

Until recently, interchange-plus pricing has only been available to high-volume merchants able to prove their processing volume with merchant account statements from their current or past provider.

Thanks to industry competition, interchange-plus pricing is now available to small and even new merchants without any prior processing history.

An interchange-plus account without a contract and cancellation fee can be tough to find. Services that provide quotes from multiple credit card processors can save a lot of time and hassle and bring the best processors to you. One such service that we endorse is CardFellow. There are numerous processors currently registered through CardFellow that are offering interchange-plus pricing free of contracts and cancellation fees.

Create your processing profile

Do you know that old saying, "nobody plans to fail, but many fail to plan" that applies to so many situations? Well that's true here, too. If you approach a merchant service provider and tell them that you want their best account, they'll ask you what that means. Being able to answer this question is the key to getting an excellent merchant account. Before you head out in search of a provider, you need to create your business's processing profile, and the next section will help you to do that.

Which rates and fees matter to your business?

No single account will have the lowest merchant account rates and fees across the board - and it doesn't have to, it just needs to have great rates where it matters to you. Dealing with providers is a game of give-and-take. They're in business to make a profit, and so are you. When you ask a provider to lower one fee, you should be prepared for them to raise another. Here's a list of pointers that will show you how to recognize the important merchant account fees and rates for your business.

Monthly processing volume

Processing volume doesn't directly impact rates and fees, it gives you bargaining power. If you're processing $10K or more each month, look for a merchant account with an interchange-plus pricing structure. If you're a new business, or processing less than $10K - don't worry, there are plenty of other variables to consider.

Average ticket

If your average ticket is on the larger side, you'll want to sacrifice a higher transaction fee for lower discount rates. If you have a smaller average ticket, the reverse is true. Here's an example that will help you do the math on your business.

Let's say that Bill's Bound Books has an average ticket of $20 and Mary's Masterful Marketing has an average ticket of $500 and they each have a merchant account with a $0.25 transaction fee and 1.7% discount rate.

Given these rates, Bill's average cost per transaction would be $0.59 and Mary's would be $8.75. Bill and Mary both called their merchant service provider to work on getting better rates. Realizing he has a smaller average ticket, Bill changed his rates to a 1.85% discount and a $0.15 transaction fee and Mary, realizing her larger average ticket, changed her rates to a 1.6% discount and a $0.30 transaction fee.

At first, Bill's discount rate and Mary's transaction fee may seem high, but look at the difference. With the new rates, Bill's average transaction cost is down $0.07 cents to $0.52, and Mary's cost is reduced $0.45 to $8.30. They're each saving only pennies per transaction, but pennies add-up over time. If they each run 10 transactions a day, Bill will save $21 a month and Mary will save $135!

Seasonality

Some businesses have significant seasonal swings where they're not processing credit cards for a portion of the year. A ski resort would be a good example of a seasonal business. The optimal merchant account for a business with seasonal swings is an account with minimal recurring monthly charges. Below are two of the more common monthly charges that a provider will often be willing to waive or lower if it means earning your business.

Monthly minimum fee
A merchant account monthly minimum fee is somewhat misleading because it's more accurate to call it a minimum charge than a fee. The monthly minimum on a merchant account refers to the amount of charges that a provider is guaranteed to collect each month regardless of actual fees. In a seasonal situation where a business doesn't have any processing charges, they would have to pay the entire monthly minimum out of pocket. Click here to read more about merchant account monthly minimum fees.

Statement fee
A merchant account statement fee is a flat monthly fee charged to process and mail a merchant account statement. Some providers are able to waive or lower this fee if you agree to receive online statements.

What account features are important to your business?

The next step in creating your business's processing profile is to list the features of your ideal merchant account.

Equipment, Software & Cost

If you're starting a business on a tight budget, the cost of processing equipment is a significant consideration and your ideal merchant account will have low-cost or even free equipment. In order to get a free processing terminal you may have to agree to a contract term - which is often the trade-off for getting a free credit card machine.

On the other hand, if you're not sensitive to start-up costs save your bargaining power for other areas and purchase a machine outright. In most cases it's economical to buy a machine instead of leasing.

Customer Service

Customer service is an important factor to most people and it varies greatly from one provider to the next. Consider the relative importance of good customer service. Almost all providers offer 24/7 customer service through their processor, but smaller sales independent sales offices (ISO) and agents can offer a more personalized level of service.

If you don't mind calling an "800" number to get customer service from the first available representative, then you can pretty much ignore this point in your search. However, if you like having a focal point of contact for customer service that knows your name - the preferred merchant account provider for you is a smaller ISO or agent.

Seasonal Shutdown

Some providers offer seasonal merchant accounts that make it possible to freeze the account for a portion of the year to avoid being charged fees when you're not charging cards. If your business has seasonal downtime, a desirable merchant account for your needs will have a seasonal option.

Not all providers offer seasonal merchant accounts and it's an important account feature if you need it. To save yourself time when comparing merchant accounts, ask about seasonality earlier in your contacts with prospective providers.

Locality

Many merchant account providers have a national and even international client base and they handle sales and customer service over the phone or the Internet. For some people distance isn't crucial as long as service is good, while others prefer a local representative they can have a face-to-face meeting with.

Your preference will dictate the type of provider that you should look for, and as we'll cover later, where you should look. If locality is important to you, you'll want to look for an independent agent that's local to your area. If prices and rates trump locality, a national ISO will most likely be your ideal provider.

Finding the best merchant account service providers

Now that you have a processing profile that outlines the perfect merchant account service for your needs, it's time to go find a provider. A great provider is crucial to an excellent merchant account. You want to find a knowledgeable, responsive, consultative provider that won't disappear once you've signed the application.

There are literally thousands of providers to choose from and weeding through them takes time and patience. Use the processing profile that you just created to determine the criteria that your ideal provider should have. Consider things like size, locality, specialties, etc. Once you figure out the type of provider that can give you the best merchant account, here are some suggestions on where to find them.

Networking

If you know people who accept credit cards at their business, ask them about the provider that the use. A first-hand testimonial about a provider's rates, prices and customer service is always a great place to start your search.

Online quoting services

There are a number of websites that offer multiple merchant account quotes from different providers. These sites vary greatly in the way they deliver quotes and the amount of service that they offer you, but they're a great time saver. One of the most comprehensive web sites for merchant account quotes is CardFellow.com. CardFellow goes beyond just delivering quotes. The web site also offers support, merchant account information and a host of other tools and services.

If you're considering using an online quoting site, there's a helpful article that discusses and compares these services in the Merchant Account Knowledgebase section of our site that you should read.

Internet search

Of course, the Internet is a great place to look for a provider. A search for "merchant account" on your favorite search engine will produce thousands of results. With so many options, narrowing the field is the tough part when you use the Internet to search for a provider.

Your local bank

Many businesses figure that it makes sense to obtain credit card processing services through their local bank because they already have a relationship. The problem with this is that many local banks outsource processing services to a third-party. In a situation like this, you won't be working with your local bank - you'll be working with whomever they outsource to.

If you're considering your local bank as an option, ask them if they handle their electronic processing or if they outsource merchant services.

Contacting & working with providers to create your ideal merchant account

Once you've created a list of at least three providers that match your needs, it's time to contact them to create your ideal merchant account. Remember when contacting providers that rates and fees aren't written in stone. This is a competitive industry and providers will do what they can to earn your business. Below are a few important pointers to consider when contacting and working with providers.

Record quotes in a uniform manner

Rates and fees can vary substantially from one provider to the next and not all providers have the same charges. To ensure that you're comparing apples to apples, you need record quotes in a uniform way.

The best way to do this is to create a chart to track offers as you receive them. Be sure to include every rate and fee from each provider that you're considering. If one provider doesn't charge a fee that another does, input a zero for that field.

Record communications

You don't have to break out the digital voice recorder to record conversations, but you do need to record promised rates, fees and account features in a way that can be clearly referenced later. You're going to find that rates and fees change quickly when providers are trying to best their competition. If you're working with three or more providers, there can be a lot of details to keep track of. If you miss something, you may end up paying more in the end when a lower promised rate doesn't make the final fee schedule.

Email is a great way to communicate with providers because it has a date, time and sender stamp and it's easily referenced later. However you choose to keep track of communication, be sure to put a name and date stamp on everything. The website mentioned earlier, CardFellow.com, has a built-in feature called the Merchant Message Board that you can use to automatically record communication between yourself and providers. It's a great feature that's worth a look.

Share rates and fees

The initial merchant account quote that you receive from a provider is just the starting point that will lead to the best merchant account. Rates and fees aren't written in stone and providers will lower or changes their charges if it means earning your business.

Providers want to earn your business and you should help them do it. The best way to help them is to tell them what their competition is offering. Don't refuse to share the competition's rates and fees - doing so will produce a better merchant account for you.

Where to ask questions

One of the hardest things about finding your ideal account is getting accurate unbiased answers to important merchant account questions when it seems like everyone in the know is trying to sell you something. There are a couple of things that you can do if/when you have questions about merchant accounts.

The first way to arrive upon an accurate, complete answer to a question is to ask the providers that you're working with. Asking a provider questions about rates and fees can feel like fraternizing with the enemy, but many providers are helpful and knowledgeable. If you have doubts about one provider's answer, ask the same questions to a different provider. In doing this you create a system of checks and balances from the pool of prospective service providers.

The application process: Finalizing your merchant account

You've created your processing profile and you've found your preferred merchant account provider whom you've worked with to create the best merchant account for your needs. You're almost there! All that's left is to review the formal merchant account application and sign on the dotted line. Here are a few valuable pointers that will help you avoid issues as you apply for a merchant account.

Review all documentation carefully

You should receive two main pieces of documentation when you apply for your merchant account, the merchant processing agreement and the merchant account application. Sometimes these documents are sent as a single booklet or file and sometime they're sent as two separate documents.

The merchant service agreement is the document that outlines the rules governing your merchant account, your rights and your responsibilities while processing credit cards. The merchant account application is the document that lists the rates, fees and other charges that you'll be expected to pay to process credit cards.

The merchant service agreement is typically between fifteen and thirty-five pages long and the application is usually shorter at between one and four in length.

It's not going to be fun reading, but it's imperative that you read both of these documents very carefully and that you ask questions about anything that you don't understand. Remember what I said before, use email or another form of communication that can be referenced later to clarify any misunderstandings.

Allow plenty of time for an approval

Merchant account applications go through an approval process that involves risk assessment by underwrites. This process can take anywhere from one to five days or more depending on the type of merchant account. Card not-present merchant accounts are considered higher risk accounts and approvals take longer – usually about three to five business days. Lower risk card-present merchant accounts are generally approved quickly – in one or two business days.

Regardless of which type of merchant account you're applying for, you should leave plenty of time from when you apply to when you need to accept cards. If you're applying for a card-not present account, leave yourself at least ten business days. If you're apply for a card-present merchant account allow at least five business days for approval.

Once a merchant account application is submitted, there's always a chance that the underwriter reviewing the application will require more information in order to make a decision. When this happens, your provider will contact you to let you know what else is needed. Information such as a bank account statement, proof of address or tax documentation are commonly requested by underwriters.

If you're asked to supply more information after applying for an account, try to gather and submit the necessary information as soon as possible to avoid costly delays.

Maintaining the best merchant account

Once you get the best merchant account for your business, you need to keep it. If left unchecked, merchant account rates and fees have a tendency to increase over time. When this happens, all of the work that you invested in finding a great account is lost. The good news is that's it's not difficult to keep your hard-earned rates and fees as low as possible. Here are a few pointers that will show you how to monitor your account and take action if your rates and fees should increase.

Questions & Comments

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On July 7, 2009 Steve said:

There is mention of a merchant account comparison chart in this article that is available for download, but I can't find it on the website. Please advise. Thank you.

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On July 7, 2009 Ben said:

I removed the chart some time ago when I felt it became more of a hindrance than a help. I thought I had removed all references to it, but it looks like you caught one that I missed.

Especially with more and more providers offering interchange plus as well as tiered pricing; it's tough to generalize a chart that's of much use. That's not to say that you can't accomplish the same side-by-side comparison in your search for a provider, it's just not effective to create a chart that's all-inclusive from the get-go. Even being in the industry, I didn't realize how many different rate and fee combinations were possible until we began developing the quoting system for providers over at CardFellow.

Those merchant account comparison tables that you find all over the Internet aren't worth the bandwidth that they use. When you're searching for a merchant account, be sure to get at least three quotes from different providers. Ask each provider that you're considering for a copy of the fee schedule portion of their merchant processing agreement.

With the agreements in hand, sit down and create a spreadsheet making sure to include all of the rates and fees. If one provider doesn't have a fee that another does, input a zero for that provider but leave the field in place.

Once you've got your spreadsheet laid out, go back through and mark the lowest rate and fee for each category. Using the lowest rate as a target, contact each provider again and let them know what their competitor is offering and invite them to match or beat the offer.

Keep in mind that charts can't accurately depict every aspect of a provider that has real value. Experience, customer service, positive testimonials from current clients and the scope of product and service offering are a few examples of things that can correlate to monetary value that a chart can't quite compare.

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On July 7, 2009 Monte said:

This comment has been moved to Independent Sales Organization (ISO)