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I wish I could say that every business that is placed on a terminated merchants file deserves it. Unfortunately I would be absolutely lying to say so.
The Terminated Merchants File (TMF) or match file is basically a list of merchants that have had their merchant accounts closed down by their processing bank on negative terms. This list, which resembles McCarthy’s black list during the cold war, is a stop-all flag that credit card processing companies in America abide by. If you are placed on the match file, you, any partner of your business, your business itself, and possibly anyone at your address can not sign up for a merchant account with a US based processing bank. Processing companies take the match file very seriously.
How to get on the list:
When a merchant ends their contract with a merchant provider in a negative way, their name can be placed on this list. Unfortunately, not all business placed on the list even know they are on it until they try to get setup processing credit cards with another company. The rules to place a merchant on the list are fairly limited, but seem often abused.
The easiest way to get on the list is to close your contract with a merchant provider and not pay your final bill. Failing to fulfill your contract is almost a guarantee that you will get put on the match file. Your final bill includes any processing costs that you owe, but also includes any monthly, yearly, or termination fees that were specified on your merchant contract. You are also liable for 6 months past the settlement date of the final transaction that was processed on your merchant account. The settlement date is defined as the date that the service or merchandise was fully delivered to and accepted by the customer. Basically, if you sold someone a 1 year magazine subscription, you are liable 6 months after they get their last issue.
Merchants are normally placed on the TMF file for failing to pay their final bill, but can also be placed on it for reasons that can be out of their control. High chargeback ratios, processing fraudulent transactions and breaking a merchant account contract are other common reasons for being placed on the TMF. Running your own credit card through your own merchant account can also get your account closed and TMF’d.
What to do to get off the file:
The only company in the world that can get you off the TMF, is the company that put you on it. It does not matter who you talk to, what they promise, who they are, or anything else, it always comes down to the company that put you on it. Business normally learn that they are on the TMF when they try to open a merchant account with another company.
The company that puts a merchant on the TMF is the processor that is taking on the risk of allowing the business to process with them. These are often the back end companies that you may have never had any personal contact with. FDMS, Nova, Global, and others are back-end processors. Merchant Service Providers and resellers are not normally the companies that can put a merchant on the TMF, unless they are taking on the risk of your credit card processing, so calling them may have no effect, but regardless, the company you signed up your merchant account with is who you should contact first.
After you find that you are placed on the TMF, assuming that you don’t know why you’re on the list, you should first call your former merchant account provider. You are going to be inevitable led on a wild goose chase of phone tag with different departments in the company. Hopefully you can reach someone who can give you answers within a person or two. You may finally be referred to the processing bank itself, but in either case, after some diligent calling you should be able to track down someone who can inform you of your situation. The most important thing to remember right now is to remain calm and courteous to every person you talk to, no matter how upset or angry you may be. Yelling and acting aggressively toward people at this state is only going to create problems. It is understandable that you are frustrated with the situation, but most of the people you talk to do not have the ability to directly change things. Once you reach someone that can explain your situation to you, possibly in the risk department, they should be able to tell you why you are on the match file and what you need to do to get off the file. At this point make sure you get a more direct phone number for someone that you can correspond with about the situation.
Depending on why you are on the TMF, it can be easy to impossible to get off the TMF. If you are on it for committing fraud yourself through your own merchant account, don’t count on ever getting off. Processors do not like fraud in any way, and if you as a business owner were the cause of it, they will not ever want to provide services to you again.
If a business was placed on the match file for a high chargeback ratio, time is normally the only thing that will get the business off. The processor needs to know that they aren’t going to get stuck with any unanswered bills from the merchant’s former customer’s Chargebacks.
If you didn’t pay your final bill, it may just be a matter of making good on your debt with your former processor. I have seen this as low as a few dollars, and the merchant was removed about a week after they made payment.
Unfortunately the majority of the time it is not that simple to get off the match file. It normally takes several weeks to get off the match file. Sometimes it takes negotiations to get charges cleared up, or fees removed. At this point every case is unique. If after a few weeks you are not making any headway, you may need to consult a lawyer. Processors normally use a system called arbitration to avoid taking individual cases to court. It is cheaper than going to a court, and the results are often better for both parties.
It is a good idea to have a clear understand the rules of Visa and MasterCard. Knowing about the match file, and the general regulations of Visa and MasterCard can help a lot when trying to get off of it.
If you need legal assistance in getting of the Match file, you will unquestionably need a lawyer that has experience in bankcard law. Here are a few resources to help you if you find yourself in that situation. I do not personally have experience with these companies but several have been recommended to me and these seem reputable. Use your own judgement before choosing an attorney.
http://www.merchantcreditcardlaw.com/
http://www.riandalaw.com/
How to stay off the match file:
Signing up with the wrong processor greatly increases a businesses chance to ever get put on a match file, especially for incidental reasons. I personally recommend signing up for a merchant account with FDMS or Nova as the back end processor, as businesses with these companies are much less likely to experience problems with the match file. In any case, make sure the provisions of the merchant account application, particularly the contract period and any associated termination fees are well understood before signing.
Related Posts:
Why are some companies offering free credit card terminals with their merchant accounts?
What Does All This Mean? - Merchant Account Fees
Credit Card Processing No No’s
Avoiding a Bad Merchant Service Provider
March 15th, 2006
Credit card fraud is a menacing problem for everyone. It helps to drive businesses prices up and drives up the price to process credit cards.
Companies have responded to businesses needs and have created fraud detection and prevention systems. These systems are used in conjunction with a payment gateway, will help businesses recognize and prevent fraud on their websites. Visa and MasterCard have also created their own prevention systems that enable card holders to create a secret password, similar to a PIN number. The Visa and MasterCard systems called Verified by Visa and MasterCard Secure code are integrated into a website to provide a secondary checkout option for cardholders who are signed up for these systems.
How fraud detection works:
There are two types of fraud detection systems. The first is tied into a merchant’s payment gateway and works in real time to prevent and detect fraud. The second is a 3rd party application where card numbers can be entered and the system generates a score based on a number of fraud qualifying factors.
Real-Time Fraud Prevention:
Fraud detection systems monitor credit card transactions that are processed through a businesses payment gateway, and look for certain signs that would indicate fraud. These systems check for anything from numerous transactions being entered from a single IP address, to advanced card number algorithm abnormalities. Real time systems can be setup to either flag a transaction for later review or can be setup to automatically decline a transaction.
3rd Party Systems:
3rd party systems are normally not tied directly into a merchant’s payment gateway, but can still be very effective in detecting fraud. 3rd party systems normally check for IP address and domain occurrences, bank information, area code and zip code occurrences, shipping and billing address occurrences, proxy web browsing, and many others. The system will generate a fraud score based on all of the information provided with each transaction. The higher the fraud score, the more likely the transaction is to be fraudulent. Merchants can batch process all of their transactions before they are shipped, and then determine whether to ship certain items based on the fraud score.
Who needs a fraud prevention system?
Fraud prevention is not needed for every business. For many, it would be simply a waste of money. Businesses that have a history of being targeted with credit card fraud should look into a fraud prevention system. Businesses that sell high dollar items online should also look into fraud prevention, as the loss of a single item can be very significant. All businesses should review their current practives to ensure that they are doing everything they can including requiring AVS and CVV for the transactions, before they look into a fraud prevention system.
What does fraud prevention cost?
Fraud prevention systems vary in cost. Some charge on a per transaction basis, some charge per month, and some charge a flat rate for a certain number of transactions. Rates vary anywhere from about $.005 per transaction to several hundred or thousand dollar per month. The cost is determined by the volume of transaction checked each month, the type of prevention system (3rd party or real-time), and the complexity of the system.
Where can I get a fraud prevention system?
Most payment gateways now offer real time fraud prevention systems. If you are using authorize.net, Verisign, or Network Merchants, you have the option of using their integrated real-time prevention and detection systems.
Authorize.net - Fraud Detection Suite
Verisign - Fraud Protection Services
Network Merchants - iSpyFraud Protection
For businesses looking for 3rd party fraud prevention and detection systems there are a variety or 3rd party systems for this purpose. Search on the internet for fraud prevention or fraud detection systems. Here is a list of a few of the services that are available.
Fractals - http://www.alaric-systems.co.uk/fractals.htm
MaxMind - http://www.maxmind.com/
ClearCommerce - http://www.clearcommerce.com/
Overview:
Fraud detection or prevention systems are by no means a perfect solution for preventing fraud, but they can help to reduct the amount of fraud that is processed through a website. With human review and fraud detection, it is still not possible to completely eliminate fraud for many businesses.
Related Blog Posts:
What does a fraudulent transaction look like?
March 14th, 2006
Being in the credit card processing business for several years, there is one thing that has always bothered me. The lack of the ability to verify the name of a person placing an order over a website or over the phone.
Lets just make a scenario to show exactly what I am referring to. Lets take John, a married middle age business man with 2 teenage boys. One day John’s oldest boy James, decides to ‘borrow’ John’s credit card to place an order online without asking.
James goes online to an ecommerce website, finds the product he was looking for. James is shopping at a large internet retailer that uses the latest fraud detection and prevention technologies. When he goes to fill out the customer information, he puts his name and address in both the shipping and billing address fields, as he doesn’t want anyone to know that he ordered with his dad’s credit card. After everything is filled out, he presses the place order button. 3 days later he receives the package he ordered.
What exactly is the problem here?
James just placed a credit card order with someone else’s credit card in his own name. To make matters worse, he probably could have entered any address within the same zip code as the card holder’s billing address.
To test this system myself
I placed an order through several websites using my address but using my father’s card. In the billing field there is small text that states “Enter card holder’s name exactly as it appears on the card”. Needless to say, I entered my own name instead. We live in the same zip code, and just as I thought, every transaction processed perfectly, and the items were delivered to me at my home address. The card might as well have been mine, because the business obviously cant tell the difference. To further add to the problem, I added one of his cards to my paypal account. Paypal is a little better and I did have to enter his street address, as paypal uses the street address and the zip code to validate a credit card’s owner, but again, no name verification. On paypal, since my own credit card is attached to my billing address, I can still ship confirmed to my address using his card.
I made sure to shop only at websites that had the words, enter name exactly as it appears on your credit card.
Liability:
If John sees his statement and doesn’t recognize that $400 charge, he can request a chargeback from his bank. When the company that shipped the product shows his bank that the order was not placed by John, they lose the chargeback. It doesn’t even matter if the product was shipped to John’s house.
In a nutshell:
What is the point of having a field asking, ‘please enter your name exactly as it appears on your card’?
The complete lack of an electronic name verification is a gaping hole in credit card security. If there were name verification, I can see potential problems that could arise if someone enters their own name incorrectly. But, if every form I fill out asks me to enter the name exactly as it appears on the card, there shouldn’t be a problem. If I have the card in my hand, I can copy the name right off the card.
Additional programs like Verified by Visa and MasterCard secure code are great concepts which greatly reduce any chance of fraud, but are expensive and difficult to implement. Small to medium sized ecommerce websites are years away for having easy access to these tools.
AVS (Address Verification):
Address verification should be used on every transaction that is processed through a website or over the phone. Address verification can either check the zip code of the card holder, or can check the zip code and the street address of the card holder. While checking both the street address and zip code better ensures that actual street address of the card holder is being used. But, in using street and zip address verification, I have received a huge number of declines due to the street address field being very temperamental.
As long as the address verification data passes when a transaction is processed, it doesn’t matter who’s name appears on the card. The business could be shipping to Mickey Mouse, but as long as that address matches, everything is fine. Until banks come up with a universally electronic system to verify names, like AVS, the risk of this type of fraud will not go away. While it is not considered a major source of fraud, it is not something that should be overlooked, especially since the liability always falls in the hands of the businesses accepting credit cards.
March 9th, 2006
Free Credit Card Terminal Merchant Accounts
The big craze in the merchant account industry is the new free credit card machine offers that many providers are offering.
About 20 years ago up until about 6 years ago, free credit card terminals were a fairly common practice in the payment processing industry. It was standard for banks and merchant service providers to offer a Tranz 330 or Zon Jr. to their customers, especially for the larger ones. Until last year, the free credit card terminal offers had all but disappeared. Brought back again in full force by a company called United BankCard, the free terminal offers have become very popular over the past year. Many merchant service providers have followed suite and are now offering free terminals to their new customers.
Free credit card terminal offer have their advantages, and they have their disadvantages. As true with almost everything, if something seems too good to be true, it most likely is…
There are now a plethora of providers that are again offering free credit card terminals. Free terminal merchant accounts are no exception to the too good to be true offers. On the outside these offers seem like a very good idea. They almost completely eliminate the processing startup cost for many businesses. The cost of equipment nowadays, is normally the only significant cost that a businesses with incur when getting setup to accept credit cards. This cost can range from nearly free for simple phone processing or virtual terminal merchant account, to extremely expensive for mobile and wireless processing equipment. The terminals that are offered for free are normally terminals in the $300 - $400 range.
Obviously someone has to pay for the equipment. After all, the companies providing these ‘free’ terminals are getting them from somewhere. And, that somewhere that they are getting them from is charging them. So, who is going to pay for the free terminals in the end?
What you really get with a free credit card terminal merchant account.
While not every company offering a free credit card terminal merchant accounts are the same, there are some things you can be sure of with every company offering these.
- An early termination fee
- An application and / or setup fee
- Additional Yearly and / or Monthly Fees
• An early termination fee is charged to any merchant who goes out of business, or leaves the processor before their contract is up. Contract lengths vary, but are normally 3 to 5 years in length. Termination fees vary, but are commonly over $300, and almost always over $200.
So what happens if you don’t pay?
Unlike a credit card where the penalty for not paying is comparatively low, if you don’t pay your processing bill, you get placed on a list called the TMF (terminated merchant file) or match file. If your name appears on this list for any reason, you and your company will never be able to process credit cards with an American bank, until you get it removed. The only company that can remove it is the one that put it on there.
• An application and / or setup fee is normally charged with free terminal merchant accounts and can vary from $30 to several hundred dollars. Sometimes both an application and a setup fee is charged.
• Additional Yearly and / or Monthly Fees which can be as high as $300 to $400 / year , and are in addition to your companies processing fees.
The bottom line:
The bottom line is that you should read your contract very carefully, no matter who is going to provide your company with a merchant account.
After $300 / year in fees, a $200 setup fee, and being locked into a 3 year contract, that $250 terminal the other company offered without the termination or random yearly charges, is looking pretty good right now.
January 23rd, 2006
Building a proper website is the foundation of any ecommerce business. Failure in creating a proper website can guaranty the failure of the online business itself.
There are several options for creating a website. Depending on how new the business owner is to web programming, and the planned budget, the options are either creating a website personally, or outsource your ecommerce website.
View the entire, Guide to setting up an ecommerce website.
January 12th, 2006
If you’ve been reading the news over the past few years, you may remember that Walmart has sued Visa and MasterCard several times. While most people don’t remember or care about what Walmart was suing over, corporate lawsuits are about as common as people, the effects of these lawsuits probably have had a direct affect on your business.
Back in 2003, Walmart and thousands of US based businesses won a class action lawsuit against Visa and MasterCard. When the dust settled, there was a 3 billion dollar settlement, and Visa and MasterCard were forced to abandon their coveted ‘all cards accepted policy’.
So, What exactly did this do?
The all cards accepted policy, ensured that if you accepted any credit cards, then you must accept all credit cards. Specifically, you had to honor Visa or MasterCard debit cards in addition to Visa and MasterCard credit cards.
The lawsuit changed the structure of the processing industry removing the all cards accepted policy.
Thats about it….
How does this affect US businesses?
While Walmart was celebrating a huge victory over Visa and MasterCard, they forgot that the ones they were suing were also the ones who set the processing rates for nearly every business in the country, and the world.
What does a business do when it looses a lot of money to the people that they provide their service to?
They raise their prices…
Visa and MasterCard removed the all cards accepted policy, and then raised interchange processing rates, 4 times in a single year. The money that Visa and MasterCard lost, would be quickly made up in extra interchange fees, and the people that end up loosing in the end. The normal US businesses.
Walmart gets to accept Visa or MasterCard, debit or credit in whatever manner they want, and everyone else gets to pay a lot more to process credit cards.
Ironically Walmart hasn’t changed their acceptance policies even though they won the lawsuit…
October 24th, 2005
Nearly every online business will run into a visitor that is trying to make fraudulent purchases on their website at some point. Hopefully the transaction or situation can be identified and corrected before it ever becomes a real problem.
Unfortunately, fraud has become synonymous with online business. There are so many ways that fraud can be committed through a website, with several desired outcomes for fraudsters. Not all fraudulent transactions are made to obtain merchandise. Card testing is another problem that some merchants face, where the transaction is not meant to obtain goods.
It is important for merchants to be able to identify fraudulent situations and purchases before there is ever a shipment of products. Voiding a transaction is far easier to do than obtaining merchandise lost to a fraudulent transaction.
Businesses will always suffer more from fraud than consumers!
Lets face it. Merchants will lose every time fighting a fraudulent order chargeback that was successfully processed through their business. Credit card fraud regulations are designed to protect the consumer and only the consumer. Businesses have very little recourse if they process a fraudulent order and ship the product. The best method to fight fraud is to prevent fraud. To do this, merchants need to take a proactive approach to combating credit card fraud.
The 2 main types of fraud that merchants face while doing business online are card testing and fraudulent orders.
Card Testing (or Carding):
Card testing is a type of fraud that many merchants are not aware of. It can have devastating effects on a business even though the business may never ship out any merchandise due to a fraudulent transaction. Card testing is the systematic testing of credit card numbers, in pursuit of finding a valid credit card number / expiration date combination. Card testing can be spotted by observing a large number of declined transactions through a payment gateway, usually in a sequential and consistent pattern. Many declined transactions followed by an approved transaction for a single user can also be card testing. Card testing is usually done with small amounts. The tester only wants to find valid numbers, and is not after tangible goods, yet.
Card testing can be very costly to a business. Most businesses are charged for every transaction, declined or approved, that they attempt. Card testers can attempt thousands or even tens of thousands of tests in a day. At about $.25 / transaction, it can get extremely expensive. Visa and MasterCard also monitor gateway addresses that have huge numbers of declines on them for the same reason. Allowing the continuance of a card tester can ultimately lead to a merchant being shut down, even if the merchant had no idea it was happening.
Card testing has 2 different phases. Phase 1 is trying to find a real card number. Phase 2 is finding an expiration date to match the card number previously found.
By using the Luhn algorithm, a tester can produce a list of valid credit card numbers. The next step is to test these numbers to see if the card is real. Once the tester finds a real card, they submit expiration dates until the card is approved. The tester builds a computer script to place automated queries into a merchant’s payment gateway. These scripts can be very complex and some can foil fraud detection software.
Card testing is reliant on 2 factors of an online payment gateway. Removal of either of the 2 factors will completely prevent the effectiveness of card testing. First, the merchant’s website must give different responses for a declined cards based on the decline reason. This is key, as a tester needs to know why the card was declined, was it a bad number or bad expiration date. Secondly the tester needs to be able to get an approval without a valid address.
Once the script finds a valid card number, but getting a wrong expiration date response, the card tester then tests expiration dates until he gets one that matches. Now he has a valid credit card number and expiration date.
Preventing Card Testing:
Preventing card testing is fairly simple. Monitor the declined and approved transactions processed through your gateway daily. Make sure that the payment gateway’s decline response is the same no matter what the reason for a decline is. Finally, make sure that a valid verified address is required before approving a transaction. These three steps will prevent card testing almost entirely.
Fraudulent Orders:
A fraudulent order is when a person illegally orders something on a stolen card in order to actually receive a product. The thief may have drop off addresses where they can pick up a delivery anonymously.
Fraudulent orders can be very costly because a merchant is setup to lose their shipped goods and later lose when the real card owner charges back the fraudulent purchase. Most fraudulent orders are never recovered after they are shipped.
Preventing Fraudulent Orders:
Fraudulent orders are more difficult to stop than card testing, but through analyzing orders that are processed through a website most can be eliminated. Fraudulent orders have the tendency to look abnormal compared to a normal order. Whether a large amount, requesting expedited shipping, strange shipping addresses, or other factors, most fraudulent orders are different than normal, and thus stand out when compared to regular orders.
Common Fraudulent Order Flags:
- Abnormally High Ticket Price.
- Different Shipping and Billing Addresses.
- Orders from Nigeria, Anywhere in Africa, Indonesia, the Philippines, or foreign orders in general.
- Requesting Expedited Shipping.
- Offering More Than the Listed Price for the Product.
- Unusual Quantity or Type of Product Ordered.
- Free Email Address (hotmail, gmail, yahoo, etc.)
- Fake Sounding Name (Ex: Rickey Rickerson).
- Persons Requesting a List of Products From You First.
- Incorrect or Fake Phone Number
Always use AVS and CVV/CV2/CVC (Card Verification) on every transaction you process. This will at the very least guarantee that the card holder has the card, and it is being billed to an address registered to the card.
If possible, check each order that is processed through your website. If you come across a suspicious order, call the customer to verify who they are. If the order is extremely large or talking to them is unconvincing, request them to fax a copy of their drivers license to you, and a signed invoice. These may be a small inconvenience to some of your customers, but the cost of fraud to your business is far greater than not taking the extra steps. Most customers are happy to verify information with you, as preventing fraud is a concern of theirs as well.
Also if you can, require a signature with every package that you ship. A signature is the only way to prove proof of delivery.
If a fraudulent order is successfully placed through your website, ‘YOU’ are the last defense. Remember that the perfect customer also fits the profile of someone ordering fraudulently.
Reference Blog Posts:
Credit card verification numbers
Reasons For Credit Card Chargebacks
September 1st, 2005
Every merchant account application consists of 4 main sections; the business and past history, anticipated processing volume and anticipated transaction information, merchant account fees, and the signature section. The Merchant Account Fee section is undoubtedly the most complicated section and is the most important to you, the merchant.
The merchant account fee section is a web of numbers and abbreviations that can confuse even the most technically savvy contract reader. The exception to the complex application rule, is a Nova application. While most companies list every possible fee incurred by a merchant, Nova lists only a few essential fees on their actual application. The Merchant Account Fees are offered to you by the bank or Merchant Service Provider you are signing up with. These organizations have a set buy price for fees, and what you get is a slight markup from what they pay.
The fee section consists of 2 parts; the processing and transaction fee section, and everything else. The everything else section is by far the larger and must be understood just as much as the other section. These sections are not divided by order, but grouped by their purposes.
The Processing and Transaction Fee Section:
Processing Fees:
This section is going to outline your basic processing fees. The Processing fee is the listed percentage of each transaction that you are charged for processing it. A standard merchant account works off a three tier system. A three tier system has a base discount processing rate, a mid-qualified rate, and a non-qualified rate. The base rate is what is most likely going to be quoted to you, but the mid and non qualified rates are just as important. Mid and Non qualifying transactions are transactions that fail to meet certain processing criteria depending on your merchant account type. Downgrading reasons are further discussed in this post: Why Am I Downgrading? - Part 1/3. The extra fees listed in the Mid and Non qualified areas will be added to the base fee if a transaction fails to qualify. Downgrade charges can make up 25% or more of your total transactions so your monthly bill can be greatly increased if you have high downgrade charges.
Good Downgrade Charges Are: +1.00% MID, and +1.50% NON.
If you have a base processing rate of 1.75% and you downgrade to Non qualified, the transaction just cost you 3.25%. This is a very good scenario. Many processors charge upward of 2 or 3% extra for downgrades, plus additional transaction fees.
Processing fees are always charged on approved transactions, and may be charged on returned transactions. This is at the discretion of the processor. About 50% of merchants are charged both directions on their transactions.
When accepting debit cards as credit cards, you can often be setup with a reduced rate debit program. This will lower the processing fees for all debit cards that you take, but they will still operate on a 3 tier system like credit cards.
Transaction Fee Section:
The transaction fee is a flat, per transaction fee that is charged on each transaction along with the processing fee. This can range from zero dollars and up, but is usually about $.22 for swiped accounts and $.25 for keyed accounts. It is commonly called a transaction fee or authorization fee. It is charged on all approved or declined transactions as well as batches and returns. It is basically a fee to access the processing network, therefore is charged every time the network is accessed.
Pin Debit Transaction Fee:
If you have a pinpad and your customers use it to process their debit card, you can be setup with a reduced rate Pin debit program. This will waive all processing fees for Pin debit transactions and you will have a flat transaction fee for pin entered debit cards.
All Other Fees:
Voice Authorization:
A voice authorization is when a merchant calls in to a Help Desk to manually authorize a transaction.
About: $2.00 - $3.00
Voice AVS:
Voice AVS is manually verifying the address of a card holder against the card by calling the card in to the processors help desk.
About: $.75
Electronic AVS:
Electronic AVS is a program in a credit card terminal that will prompt and verify the card holder’s address against the information linked to the card. This is done completely automatically through the terminal.
About: $.5 - $.10
Discover:
This is an extra transaction fee for processing a discover card.
About: $.30
American Express:
This is an extra transaction fee for processing an American express card.
About: $.30
Batch / Batch Header Fee:
This a fee charged each time a merchant batches out their terminal or software.
About: $.0 - $.30
Chargeback Fee:
This fee is an administrative fee charged any time a merchant receives a chargeback.
About: $15.00 - $30.00
Return Fee / Return ACH Fee:
A return fee is charged if your bank account comes up with insufficient funds when the processor tries to collect payment from you.
About: $15.00 - $30.00
Early Termination Fee:
An early termination fee is a fee that is charged if a merchant closes their account or breaks their contract before the agreed upon time in the merchant account contract.
About: $0.00 - $500.00
Retrieval Fee:
A retrieval fee is a fee for requesting a copy of the transaction receipt for a transaction that you processed. Make sure this one is blank. Why should you be charged when a customer or the processor needs a copy of a transaction from you?
About: $0.00 - $15.00
Sales Transaction Fee:
A sales transaction fee is an additional transaction fee added to each transaction that a merchant processes. This is a fee that is only used for the provider to make an extra buck off a merchant. If you find you are being charged this, you should probably find another provider.
About: $.00 - $.30
Monthly Minimum Fee:
This is the minimum amount that you must pay in processing fees each month. If you are unable to reach this amount, then you are charged the difference of this amount at the end of the month. The monthly minimum is calculated only from discount processing fees. Additional Mid and Non qualified fees are not included in reaching the monthly minimum.
About: $15.00 - $30.00
Statement Fee:
This is a monthly fee for the delivery of a paper statement to your business. By law, a paper statement must be sent to you each month, so this fee is rarely waivable.
About: $5.00 - $10.00
Wireless Fee:
If you are processing with a wireless credit card machine, this is basically your monthly cellular bill.
About: $20.00 - $30.00
E-Merchant View / Online Account Access Fee:
If you are setup with online access to your merchant account, this is the monthly fee you are charged to have the ability to access your account online.
About: $5.00 - $10.00
Internet Access Fee:
If you process over the internet or through a website, this is an additional fee for all internet transactions. This is another fee some processors use to make an extra penny from their customers.
About: $.05 - $.10
Supplies Fee:
Some merchants are setup with monthly supplies. This fee is for those supplies.
About: $Varies
Monthly Fee:
This is a blank spot for a provider. Make sure it is blank when you sign your merchant account application. There is no reason you should ever pay this fee.
About: $Varies
Annual Fee:
Some processors charge an annual fee. The fee listed here is what you have to pay once each year to process with that particular company. This fee is only seen with a few processing companies.
About: $Varies
Other Volume % Fee:
Yet another blank spot for a provider to add some more penny stealing fees. Make sure this one is blank too.
About: $Varies
Other Fee:
The worst blank spot on any application. Just one more anything fee that some providers use to make a little more.
About: $Varies
Setup / Startup Fee:
This is a fee just for getting setup with a provider. Most good providers have no setup fee.
About: $Varies
Application Fee:
Even more ridiculous than a setup fee, some companies charge you just to apply with them. Unless you are a non-American or high risk business, if a company requires this, find someone else.
About: $Varies
August 17th, 2005
This topic will consist of three posts; the first covering common reasons for a merchant account to downgrade, the second will cover ways to help prevent transactions from downgrading, and the third will cover case studies putting these methods into action.
I will also reference a great article written in the Green Sheet, called Interchange Untangled. It is lengthy, but is the best source for transaction downgrade information that I have found, anywhere.
http://www.greensheet.com/interchangeuntangled.html
Credit card downgrading is common in every business merchant account. A transaction downgrade is where the transaction fails to meet certain pre-defined criteria, and an additional charge is added to the fee for processing the transaction. Some businesses see many downgrades while others may only see a small percentage of downgrades. There are generally 2 levels of downgrading, MID-qualified and NON-qualified. MID being the first downgrade level and NON being the highest downgrade level with the greatest additional fee associated with it.
To understand what causes a card to downgrade, you must first know what a transaction needs to fully qualify and to not downgrade. In credit card processing, downgrading is synonymous with risk, meaning that only the lowest risk transactions fully qualify. The lowest risk transaction would be a transaction from an American consumer’s credit card, successfully swiped through a mag reader (Credit Card Terminal, PC Mag Swiper, etc.) and successfully batched the same day as the transaction. If a transaction does not meet any of these criteria, it downgrades.
Face-To-Face requirements for fully qualifying a transaction:
- Card-holder, merchant and POS device must all be present at the time of sale.
- Card must be swiped.
- Only one authorization is allowed per transaction.
- Merchant must batch within 24 hours of processing the transaction.
- Merchant must obtain the authorized cardholders signature.
- Restaurant transaction must be within 20% (Visa), 25% (MasterCard) of the authorized amount (Tip Compensation).
Card Not Present Requirements for qualifying a transaction:
- Presence of card or customer not required.
- Authorization request must be approved.
- Signature not required on receipt.
- One authorization per transaction with one allowed reversal to equalize authorization amount.
- Transaction must clear in two days, and include: purchase date, customer service phone number, URL or email address (if applicable), order number, mail/telephone order specification, ecommerce indicator, total authorized amount.
- AVS required on all non-recurring and the first of a recurring transaction.
- AVS not required for subsequent recurring transaction less than one year apart.
The exception even if all requirements are met, is if the credit card being processed is not a standard consumer credit card. International, corporate and business credit cards will almost always downgrade to a MID or NON qualified level. Once again, this is due to a higher risk of processing a business or international card than a consumer credit card. The way around corporate downgrading is a business-to-business merchant account, which will be discussed tomorrow.
Overview of the common downgrade reasons:
- Accepting a business or international credit card.
- Keying-in a credit card, instead of swiping.
- Failing to batch within 24 hours of making a transaction.
Next topic is steps a merchant can take to help reduce and prevent downgrades.
August 11th, 2005
Gone are the days of businesses needing to lease credit card processing equipment. It was once a common practice for a business that was looking to start accepting credit cards, to lease their first credit card terminal. The leases usually ran anywhere from $30 - $75 / month for three or four years, for the use of the processing equipment. In the past, leasing was a major cash flow source for merchant service providers. Eventually businesses began to shop and found that they were paying way too much for their processing equipment, often more than ten times what the equipment was worth.
Thankfully, the internet has provided businesses with instant access to near wholesale prices on processing equipment. Now, any business can get low prices on credit card equipment and literally save their business thousands of dollars. This leads to the question, why would any business lease processing equipment.
In reality there are bad businesses out there. These businesses aren’t out there to provide a good service or product, or even to help their customers in any way. Their main and only purpose is to take your money, and they have no regrets about doing it. What is also unfortunate is that many of these companies are ones that many people trust with their money. Large banks seem to be a very common culprit, but are not the only perpetrator.
Example: A customer contacted me about getting setup processing credit cards. They were processing through a large, highly trusted, national bank chain, which I will refrain from naming, although I would really like to. They were processing on a Nurit 2085, which we sell for $265. They were locked into a forty-eight month lease. This lease cost them $300 to setup and $49 / month. If you calculate the cost that they would pay for this simple, relatively cheap terminal, it was going to cost them over $2,600. That’s $2,300 more than the terminal is worth. That is the equivalent of buying a $16,000 car for over $150,000. That’s absolutely insane. What’s even worse, is that even after forty-eight months, they still did not own the terminal. This was not a lease to own.
This may be an extreme case of a customer being ripped of by leasing equipment, but this type of lease is not uncommon. Thankfully the industry standard lease is well below this absurd amount.
Nurit 2085 Example Lease:
Purchase Outright: $265.00
Lease: $24.95 / month for 48 months.
$24.95 x 48 = $1197.60
Wireless Nurit 8000 Example Lease:
Purchase Outright: $779.00
Lease: $39.95 / month for 48 months.
$39.95 x 48 = $1917.60
The point is that you will pay significantly more if you lease equipment when compared to purchasing it outright. Look at the picture, what may sound like a good idea, seems ridiculous when applied to a larger scale. You also may not be in a contract to actually own the equipment that you are paying so much for. If you have to lease, make absolutely sure that is it your last option. Find a company that will give you the lowest possible lease, and ensure that it is a lease-to-own. Most importantly, shop around.
Also keep in mind, that if you find a ‘too good to be true’ company, it most likely is.
Check Out the processing equipment lease cost calculator.
August 10th, 2005
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