The Independent Sales Office, or ISO, is not only focused on generating merchant accounts for the Processor they are registered with, but are responsible for maintaining their relationships with the merchants that are accepting and processing credit cards through them. An ISO can be anywhere is size from a few people to hundreds and can offer everything from merchant accounts and customer service to technical support and credit card terminals.

As a rule of thumb I tell merchants to do their homework because bigger isn’t always better when it comes to choosing an ISO. One of the main complaints I get is that as the ISO gets bigger, it’s usually at the expense of service or support. Many merchants have told me they are on hold forever and sometimes can’t even speak with a live person. A good ISO will have agents whose job is to create and foster the relationships with businesses and merchants that need brand new, different or additional merchant accounts yet also require a good level of support and service to go with them.

Finding the right ISO and having a good agent to assist you whenever you need will make the whole process pain-free and give you the peace of mind knowing you’re never on your own when you need service or support.

The majority of merchants seem to have no idea just how beneficial accepting credit cards can be for their business. If they just took a little time to learn how the Payment Card Industry works, I am sure I would hear a lot fewer negative comments. There is a common misperception that accepting credit cards or opening a merchant account is expensive, time consuming and just not really worth it. For every merchant that has turned away a paying customer because they wanted to pay with a credit card I ask, “Can you afford not to take credit cards?” More often than not I find myself spending some time with the merchant to let them know what the benefits to their business could be and also explaining the simple process of getting a merchant account.

Once they realize that the main reason they’ve had for not opening a merchant account is incorrect or misguided they want to know more and always have some degree of questions for me. I typically try to find out what their concerns are, begin at the top and work my way down starting with the major credit card companies we are all familiar with and ending with their customers – all the while answering questions along the way.

The big credit card companies are not an actual bank as many think, but have relationships with many different financial institutions, the most common being what you and I think of as a traditional bank. In the Payment Card Industry these are referred to as “Member Banks” or “Acquiring Banks” and have been approved by the credit card company to issue merchant accounts based on certain criteria. The guidelines and requirements are set by the credit card company themselves and must be agreed upon in order for that bank to become a “Member” of said company and therefore qualified to approve accounts allowing merchants to accept that type of credit card. The biggest of these is of course Visa and I will use Visa as the standard for demonstrating any examples. So up to this point we have Visa and a bank that has been accepted as a member of Visa and thus is now considered an “Acquiring Bank”.

Once a bank has been approved by Visa they are able to qualify and approve businesses for merchant accounts. These banks often times also create relationships with other companies to generate more business or to cover a larger demographic or geological area. Since the bread-and-butter for most banks is not in merchant services or the merchant account sphere, many encourage other companies who focus entirely on merchant services to become “registered” with them. In the Payment Card Industry (or PCI) these companies are referred to as “Processor’s” or “Service Providers” and are to able to approve merchant accounts assuming they meet the agreed upon criteria.

Ultimately, the merchant has the final say as to whether or not they are going to accept credit cards as one form of payment for their products or services. The ability of a merchant to accept payment via credit cards is getting safer, faster, easier, and more accessible everyday. The Payment Card Industry is committed to providing the largest array of credit card products, services, and solutions possible in these days where plastic is King.

Here are some tips to ensure your account is set up correctly:

1.      Processors are being more diligent in setting up guidelines, like monthly minimums and high ticket limits, and sticking to them. Setting up a merchant account with incorrect parameters can cost your business a lot of money. A tile company was set up with a high ticket limit of $600, and made a sale for $3000. The money was held by the processor and awaited verification from the customer with their issuing bank. The customer was unavailable to make the verification for 2 weeks. The tile store did not receive their money for the entire 2 weeks. Make sure you explain to your sales agent your specific volume needs and avoid the unnecessary headache that can be associated with large purchases.

2.      When selecting a merchant services provider for an online business, it is important to ensure that you have adequate reporting. With an online business, you don’t get to see your customer face to face. You have to have a way of retrieving customer information in the event an issue arises.  Make sure to see a demo of the reporting the online system will be using.  This will save you time and money when going to see your accountant too. If an issue does come up, will there be a live person you can talk to?  Make sure you have access to 24/7 live support.

3.      Ask about Underwriting, Risk Monitoring, and Fraud management systems.  Is the company you are processing with PCI DSS Compliant? It is important that your and your customer’s data is secure. If you fall into a High Risk category, can the company you chose still get your money to you in a timely manner? Will they expect money to be put in reserve, and if so, for how long? Does the chosen company have a system for monitoring fraud? Many providers don’t have an early warning system to alert merchants in the event of stolen credit card purchases.

The more your sales agent and processor know about your business, the better your overall service, rates, and technology will be. Look beyond the rate and pick a partner that will help your business grow.

One of the most interesting scams that has come up frequently is related to hidden merchant fees. This scam entices merchants to apply for accounts at low rates with a brief quote. They conceal fees, rates, and many various extra charges. When applying for a merchant account, is important to stay away from advertisements that claim to have the lowest rates around. Some key fees to ask for are: discount rates, mid qualified rates (keyed rates), non qualified rates (rewards card and purchase card rates), transaction fees, setup fees, annual fees, statement fees, services fees, PCI Compliance fees, merchant club fees, and early termination fees.

Many times, merchants will receive a lengthy terms and conditions document. There are usually many different fees within the fine print of this document. You should request the terms and conditions document in advance and make sure to read through it carefully. You don’t want to be caught with a lot of unexplained and unexpected expenses.

Also beware of the “Hold Back” or reserve account. Some scams prey on e-commerce merchants looking for the lowest rate. Once the merchant finds the rate they are looking for, they fill out a surprisingly short online application. A high reserve is requested in order to grab the maximum amount of money without arousing the merchant’s suspicion. All of the sudden the merchant account provider disappears,  the telephone number is disconnected, and your money is gone. It is important to find out what bank your card processor is registered through, and who will actually be responsible for your money if they should happen to disappear.

About a month ago, a merchant contacted our company to set up a merchant account and began running thousands of dollars in transactions. After the first month of processing we received a call from a business owner claiming he received a credit card processing bill from us, but that he does not take credit cards. The imposter account was a SCAM! The fake purchases were made with stolen credit cards and deposited into bank accounts owned by the fake company. These guys generally run small transactions and fly under the radar. They also registered a domain name that is similar to that of the business they were impersonating.

How might this have been caught sooner? Merchants and consumers should check their credit reports frequently and report any suspicious activity. It is also helpful if companies look through the web to see if there are websites that resemble their own or use their business name.

Most merchants may not know this, but there is a black market that trades card holder information and business information. An office machine company I worked with had a situation where a customer charged $25,000 in office equipment. The merchant waited three days before using the money deposited in his account. It wasn’t until two weeks later that he found out that the card was stolen and the purchase was fraudulent. The card processing company held the merchant liable for 100% of the transaction. Now this merchant was out the money and $25,000 worth of product.

Merchants who make large transactions like this can help protect themselves by contacting TM&S about our Chargeback Prevention and Management solutions.

In New York, in 1950, the first credit card was released by Franklin National Bank of Long Island. It was also in New York in 2001 that our entire outlook changed. The World Trade Center was attacked and Homeland Security was created to protect our nation from terrorism. The government put in place The Patriot Act, which affected the merchant services industry by putting stricter guidelines on account approvals. Merchants are now required to submit a copy of government issued documents identifying themselves and their business.

The following items are considered acceptable (you will need a minimum of one from each category):

Business

• Corporate resolution including date and place filed
• Articles of Incorporation
• Business license (fictitious name statement)
• Business Financials
• Partnership agreement

Personal

• Copy of driver license
• Passport
• Resident Identification card
• Military Identification

Processors may ask business owners to provide monthly volume, average ticket, years in business, and even personal bank statements. The processor is ultimately trying to protect themselves and the merchant from losing money. By putting these types of fraud controls in place, credit card processors can monitor suspicious activity. They can monitor frequent declines and large transactions that your business does not typically do. There are many different acquiring banks and each has their own criteria for approving a merchant account. Most processors can provide you with their underwriting guidelines. Check with your processor on what criteria your account may need to get approved for a merchant account. 

Merchants may be required to provide the following:

• Two years of tax returns for the guarantor
• Six months of processing statements. If you have not processed before, you will be required to provide six months of bank statements
• If you are an internet based account, you will need to make sure you have a clearly visible return policy
• It helps to have a tangible product – I once had a loan restructuring company create a package with a welcome letter and question kit to send to all his customers once they purchased his services.

There is always a way to get a merchant account for any business type. Some business types such as Adult, MLM, Telecommunications, Escort Services, Internet startup companies and Travel may require higher rates, and in some cases a reserve account. The amount you may be required to put in a reserve account varies, based on your volume and business type. Most merchant services providers typically are looking to protect themselves against chargebacks. A consumer can dispute a charge for up to 180 days after the purchase, so processors create reserve accounts in case a chargeback does occur. In my experience, banks like your chargeback ratio to remain under 1%. Otherwise, merchants can be fined and have their merchant account turned off.

There are always offshore options. Offshore processing may be the only option for some business owners and can be costly with rates as high as 10%. Typically, merchants have to pay wire transfer fees as well as high transaction fees. To learn more about these and other options, contact your merchant services provider.