3 Things Merchant Account Providers Don’t Tell Businesses

  • Businesses have realized that cash is a thing of the past. People are using credit and debit cards to make purchases, and this makes sense: added security, smaller in size and fast access to their money. And there's also the benefit that the merchant has to pay the transaction fee.

    The problem is that credit and debit cards bring an entirely new layer of complexity to a business.

    Common complaints from businesses include:

    1. High Fees Causes Pricing Issues

    Consumers are fickle. When a person goes to buy a smartphone, they often won't blink at a $3 - $4 difference, but when this same individual finds that their meal has a 3% charge tacked on to it, they might complain.

    The consumer might never go back to your business again.

    How much will you pay? It depends on volume and which credit card merchant you plan to use. I've heard rumors of some merchants having an effective fee rate of 5%, but for most businesses, this rate is somewhere near 2%.

    Depending on the account, you may pay a per transaction fee, too.

    You may also face:

    • Monthly or annual fees
    • Transaction minimums

    Fees can start to add up quickly, and when these fees continue to mount, this means your business has to figure out a better way to price goods. Some businesses will charge the client for the fee directly, while others will build the cost of processing into their pricing.

    For example, a $100 jacket may now be marked up a little over 2% to make up for money lost in fees.

    2. Chargebacks Hurt Bottom Lines

    Consumers can initiate a chargeback against your company. A chargeback is a protective measure that helps consumers defend against fraud and unauthorized activity. This is a common practice in many industries.

    The idea is that there are scam merchants that exist.

    Take, for example, binary option chargebacks. A lot of people will use their credit card and get duped into a scam where they have few options to get their money back. Companies break restrictions and become predators that target the elderly and potential investors.

    Consumers have protection against these fraudulent activities by processing a chargeback

    But this can happen in many circumstances:

    • When unauthorized charges are posted to a cardholder's account
    • When an item is misrepresented or advertised deceptively
    • When an item isn't received

    The problem is that some merchants will be duped in the process, losing out on inventory and having the transaction reversed.

    Merchant account providers will also keep a close eye on merchants that have an abnormally high level of chargebacks.

    3. Customer Service Tends to Disappear

    You'll find that, like with most service providers, there's a period of transitioning and selling before customer service seemingly disappears. Merchant agreements are all about making money, and the agreement may not be in your favor.

    • Tiered pricing systems often come with fine print
    • Few merchants often qualify for the lowest rate
    • Independent resellers often provide terrible customer service

    A lot of people need merchant accounts, and when you're not locked into an agreement, customer service will be ready and waiting for any questions you may have.

    Poor customer service is a top complaint, and it often has to do with the individuals or third-party sellers that helped you get your agreement in place. Many of these individuals work on commission, and they aren't trained very well or trained at all in some cases.

    These individuals are salesmen, but when it comes to needing real help, they can't offer much assistance.

    It's a major problem, and this leads to calls going unanswered or playing phone tag without ever getting your concerns or questions remedied. Automated answering systems are another inconvenience.

    Sometimes, I wonder if the seller is ever in the office because the answering machine picks up so quickly.

    If you want to avoid many of these customer service woes, make sure you're dealing with the company directly. You'll find that a direct contact within the merchant account provider's company will allow for your questions to be answered as quickly as possible.

    Merchants need accounts to accept credit and debit cards. If you're in an agreement with a provider already, try and renegotiate or wait to negotiate a better deal when your contract is up. Also, be on the lookout for any termination clauses if you plan to cancel early – they can be very expensive.

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