Common Pitfalls to Avoid When Choosing a Merchant Service Provider

1. Never lease a  credit card terminal

Many of our competitors offer leasing services as a way to help companies afford the purchase of a credit card terminal. While this may seem like a noble enough service, don't be fooled. The reason the credit card machine is unaffordable in the first place is because the company selling it often has a markup on the machine of 500% or more.

This means the credit card terminal they are selling for $1250 only costs them $250 to purchase brand new. Instead of purchasing the machine for $1250, they give you a $55 a month, non-cancelable lease for four years. This means you will spend $2,640 throughout the course of your lease for a machine that a company with integrity, like Payment Logistics, would have sold to you for no more than $300-$350.

2. Never select a service provider that does not conduct in-house risk management and fraud monitoring.

Many merchant service providers do not assume liability or conduct any of the underwriting on their accounts in-house. They act solely as a sales and service organization and do not take on any of the responsibilities of managing risk and conducting Real-Time Fraud Monitoring. This means the bank they represent is most likely underwriting your merchant account and conducting the Fraud Monitoring associated with your account. The banks are unable and/or unwilling to get to know your business personally and generally rely solely on the numbers. Following are a couple of major issues that can arise when unusual or high risk activity occurs on your account and your service provider does not conduct Fraud Monitoring and Risk Management in-house:

  • Funds are suspended and not released until after you have responded to a written notification (usually mailed) of the suspension and provided a written explanation of the activity. This whole process can often take up to two weeks when the issue could have been resolved in one or two days if the Risk Manager would have called you or sent an Account Represenative out to verify compliance information.

  • Your merchant account is terminated because you ran an unusually large transaction. Often times Risk Managers who focus solely on numbers will ignore reasonable and verifiable explanations because the numbers fall outside preset parameters of acceptable activity. An in-house Risk Manager will research the transaction and often allow for much more flexibility within the preset parameters of acceptable activity because they are able to take the extra steps necessary to mitigate the risk.

3. Never select a service provider that does not offer in-house customer/technical support.

Many merchant service providers outsource their customer and technical support to the processing network's “Help Desk” or a third party “Help Desk.” While the technicians and personnel working at the “Help Desk” are generally well qualified and have the necessary resources to resolve credit card terminal or technical issues, they are not empowered to make actual changes to your account. In addition, they do not have a vested interest in making sure the customer is satisfied and all issues are resolved.

Following is a partial list of actions that an outsourced customer/technical support department would not be empowered to take:

  • Changing your account to have your fees debited once a month instead of every day.

  • Issuing refunds.
    Overnight shipping of replacement or loaner equipment in the event of a terminal malfunction.

  • Trouble shooting many types of PC Software or Internet Gateway products.

  • Matching a competitors rates in an effort to save your business.

  • Changing your address.

  • Changing your Doing Business As (DBA) name.

  • Changing the bank account your funds are deposited to.

  • Sending out an Account Technician to provide you with in-person support.

  • Emailing you customized reports to help you reconcile credit card processing bank activity.

  • Changing the way you receive your deposits (Ex: deposit by batch or by daily total, withdraw fees individually or in one lump sum).

  • Discussing Fraud Control features and steps to prevent customer disputes.

4. Never sign a contract that does not allow you to terminate your agreement without penalty if your service provider arbitrarily raises your rates.

Many of our competitors have contracts that do not allow you to terminate your relationship with them if they arbitrarily raise your rates. For instance, let's say you sign an industry standard three year agreement with your merchant services provider. There is a termination fee of $500 if you cancel before three years. The three year contract with a $500 early termination fee is not necessarily a bad thing if your service provider is locking in your rates throughout that time (subject to Visa/MC interchange modifications).

However, if they are able to raise your rates at any time without providing you with an opportunity to cancel without penalty, then you are receiving nothing in exchange for agreeing to a three year contract with an early termination fee.