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Comparing
Merchant Accounts Providers

Okay. You've determined that you want to accept credit cards in your business and you're ready to start comparing merchant accounts...but how exactly do you go about doing so? Advice on how to compare Merchant Accounts

Your natural inclination is to focus primarily - if not exclusively - on the comparative costs associated with establishing and maintaining your merchant account. But while cost is obviously an influencing factor, please keep in mind that unless your sales volumes are going to be very high, cost may not be that important.

For example, the difference on a monthly sales volume of $10,000 between a discount rate of 2.25% offered by one company and that of 2.40% offered by a competitor is only $15 a month - really a pittance in the great scheme of things.

With that in mind, we've compiled some of the issues you may encounter when comparing merchant accounts - and how to deal with them:


Avoid any company that charges you a fee just for applying for a merchant account (except if it's for an international or offshore account, where application fees are fairly common and are usually refundable if your application is not accepted).

Often hidden in the small print, some companies charge a termination fee if you cancel your merchant account within a specified time period (one year is common, but it can be as high as three).

Ask the salesperson for the merchant account company to reveal all of the possible fees you can be hit with - and to put it in writing. Hidden fees can include chargebacks, inquiry fees, etc.

Retail merchant accounts often have the lowest rates but if you process an order otherwise than through using the swipe machine, you may be hit with an additional charge of 1 percent to 2 percent or more. These nonqualified or midqualified transactions can result in higher than expected processing costs.

Visa and Mastercard charge processing companies about 1.99% for internet and phone/mail merchant account transactions. The companies then charge you a bit more - this is how they make their money, so be careful if you're offered discount rates under 2.00%. Something may be array.

When comparing merchant accounts, be sure to find out if your processing company can raise discounts fees without notifying you or if it can impose new fees. If it can, make sure your fees are firmly set for at least a couple of years. Be usre the processor can't alter your rates after a few months if you don't meet their volume requirements. Ensure rates are fixed and not merely introductory.

Some questions you should ask about fees before you sign on (if they won't answer the questions, be careful):

  • Do you have a processing volume limit and, if so, what is the penalty if I exceed it?
  • What are the surcharges you apply to nonqualified and midqualified transactions?
  • What exactly is required to conduct fully qualified transactions?
  • Are your rates fixed or merewly introductory?
  • Will you put in writing for me all of your rates and fees?

Service Issues

Prior to signing, check out the customer service the company offers offers. Try out their toll-free number and find out if you can only leave a message or whether a live person answers. How well do they respond to your enquiries? And try their email address with questions and see how long it takes to get a satisfactory response.

  • Ask them for the names, phone numbers and email addresses of some customers and then enquire of them how they view the service they've been receiving.
  • Is their service department open 24 hours a day, 7 days a week? You want to be sure they can respond quickly if you encounter a problem in processing an order.
  • Is there someone available to assist you in setting up the processing software or terminal once you sign on?

Credibility Issues

  • Try to see from the website of the provider if it appears credible and forthcoming. For example, does the site show how many years it has been in business? Website review is a good start in weeding out those that may not be credible.
  • Find out what each provider's history of adjusting its discount rate and other fees is. If they refuse to give you the information, beware.
  • Look out for any of the following when comparing merchant accounts:
    • a failure to answer their phones or to return calls reasonably.
    • a refusal to answer questions.
    • no indication which banks they deal with.
    • no website disclosure of their fees.


Technical Compatabilty Issues

  • Providers use different gateways for their clients' online processing, so ensure you will not need to make modifications to your website to accommodate their gateway and that your website will work effectively with their card processing system.
  • Also make sure your shopping cart is compatible with the processing system.

Contract Issues

  • Review the provider's contract carefully - if you sign on, you'll be bound by the terms it contains.
  • Amongst the contractual issues are:
    • do they charge a penalty if you want out of the contract?
    • are you comfortable with all of the various fees disclosed in the agreement - and do you understand them? If you don't, ask before you sign.
    • do they require a security deposit or that a reserve be maintained?
    • under what circumstances can they terminate your agreement and your merchant account?
    • is there a monthly transaction limit, above which they can raise your fees?
    • what is their chargeback policy? If you have too many chargebacks, can they withdraw or withhold funds from your merchant account?
    • can they raise the discount rate - or any other charges - without notifying you?
    • can you process international orders?

Overall, when comparing merchant accounts, it is important that you take the time to understand exactly what your getting into - before you make your final decision. When in doubt, ask. And if the provider doesn't respond satifactorily, stay clear.

And be sure to check out our recommendations for the top internet merchant accounts, phone & mail merchant accounts and retail merchant accounts.

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