Frequently Asked Questions
Below are some FAQ topics of interest to many merchants. As always, feel free to contact us by email email@example.com, or toll-free at 1-866-210-4625. We are available 24 hours a day, seven days a week.
Please select a topic:
Choosing the Right Merchant Services Provider
Point of Sales Frequently Asked Questions
Questions on Interchange and Pricing
Questions on Fraud and Chargebacks
Choosing the Right Merchant Services Provider
- What should I look for in a merchant services provider?
There are a lot of very good providers in the industry. Here is a list of several things we feel are essential in choosing a merchant services provider:
- They ask you a lot of questions about your business and how you are going to accept payments.
- They are willing to go into detail on how they will bill all types of transactions, not just the low published rate they are offering.
- They talk to you about much more than rates and fees.
- They are willing to work at your pace for set-up and will provide you with important training on how to process a credit card and protect your business against fraud and chargebacks.
- They clearly explain all terms and fees on your fee schedule, purchase agreement, and/or lease agreement.
- Should I pay a set-up fee?
This can go either way; of course, no one wants to pay a set-up or reprogramming fee, but depending on your arrangements, it could be required due to the additional time and training it may require to get your business set up correctly. Do not base your decision on a merchant services provider on set-up fees alone. Many companies advertise “no set-up fees,” but have other hidden fees not initially disclosed that you will eventually pay.
So, in conclusion, take a look at the overall program. Has your prospective provider clearly explained all applicable fees? Do you feel the expected training and services you will receive are worth the prospective set-up costs? Be smart and take your time in asking a lot of good questions.
- What is the difference between my bank and an independent processing company?
Most transactions that take place in the industry happen on one of a few processing platforms, and most financial institutions do not process the transactions themselves. They use a third party network. Here are a few things to think about:
Most banks focus on driving in deposits and handing out loans, and merchant services is an afterthought. Most sales representatives in this arena will only have a basic knowledge, and will be locked into a few pricing options, which makes it difficult for them to customize the right program for your business. However, many will be able to offer faster funding times due to clearing and funding the transaction in the same financial institution.
Some associations and trade organizations may recommend a processor to you with whom they have negotiated a deal. Some of these deals can be extremely good for your business, and others may not be so good. It is important, again, to ask a lot of questions and not blindly go with a processor simply because it was recommended by a group you are associated with. Also, many of these partner agreements give revenue streams back to the association for members they have referred to the merchant services provider.
Independent Sales Organizations (ISOs)
A wide range of companies fall into this category, from extremely professional and knowledgeable organizations, to the fast-talking car salesman who you will never hear from again after signing the agreement. ISOs have a wide range of offers from free terminals to low introductory offers. Again, stop and ask yourself if you feel the sales representative is getting to know your business and offering solutions that will be good for your business, or do they seem focused on price only and how much they will save you?
- What other services should a merchant services provider offer me?
A merchant services provider should offer you online reporting tools, 24-hour customer service, terminal, and technical help desks, periodic merchant service reviews, and access to an assigned person who knows your account; usually this is your sales representative, but it could be a relationship manager. Be very careful of a company that cannot offer your business support during your business hours. Remember, merchant services is a way for you to receive payment, and if your service is down, you will need access to support.
Point of Sales (POS) Frequently Asked Questions
- Can I reprogram my terminal without buying new equipment?
Generally the answer is yes, you can reprogram your current terminal, unless you have extremely antiquated equipment. However, you may be looking to add additional services like PIN-based debit, check processing, or gift cards. In some cases, older equipment cannot support some or all of the additional services.
- Should I lease or purchase equipment?
This is a personal decision based on the financial position of your company as well as what type of business you are running. Here are some general thoughts:
- Most, if not all, leases cannot be canceled. This means you are obligated for the full term of the lease, regardless of the status of your company. Leases can usually be transferred, but check with your leasing company.
- Leases offer you the ability to defer payments over a term and keep needed capital in inventory where you can turn a profit, instead of investing in equipment that will depreciate over time.
- Leases usually come with a free replacement program for the full term of the lease if your terminal is defective.
- It is important to learn about and understand the buyout options, too. Check with your accountant or CPA on the tax benefits of leasing.
- You have the ability to upgrade equipment when new technology comes out.
- There is generally a lower overall cost than leasing.
- Equipment is generally treated as customer-owned after one year of ownership.
- Should I buy a terminal online and save myself some money?
Again, this is a personal decision; you can find some very good deals online if you know what you are looking for. Check with your prospective or current processor and find out how they will handle programming the terminal. Find out what will happen if the terminal doesn't take the download and needs to be replaced. Also, be cautious if you are getting a new terminal or a refurbished terminal. What is the warranty if the terminal is defective, and what is their return policy if you should change your mind? Generally, your current processor will be able to offer competitively priced equipment with better warranties than you will find online. You also have the confidence of knowing that you are getting new equipment, and not a refurbished terminal.
- A processor is offering me a free terminal when I sign up, is this a good deal?
It could be, but in many cases the processor will have additional fees you will pay in order to get that terminal. Remember nothing is free, just a different way of paying for it. Mostly this is a marketing concept to get merchants to sign with their service. Other processors may have increased cancellation fees to have you pay for the terminal upon leaving the company.
In general, take a look at the total cost of the service and equipment. Look at the information and/or services your sales representative is offering you. Take your time and make an educated decision.
Frequently Asked Questions on Interchange and Pricing
- How do Visa® and MasterCard® set interchange?
Interchange is set in response to dynamic and highly competitive market forces and strikes the right economic balance between participants in the payment network. Among other things, it varies by the type of merchant, cost of sale, payment product type, and processing technology the merchant uses. For example, transactions at fuel merchants, quick service restaurants, and car rental agencies each possess unique attributes that require different interchange categories and processing strategies. Similarly, the type of payment product used (e.g., face-to-face or over the Internet) affects the interchange rate and processing requirements.
- Who pays interchange?
The merchant services provider generally pays interchange. Merchants make a payment to their acquirer for credit card transactions, frequently referred to as a discount rate. This is a market-based fee set by each merchant services provider operating in a competitive marketplace. Merchants can choose their merchant services provider in the same way cardholders can choose the card issuer that issues their credit card. Interchange is only one component of the cost of doing business.
- Can merchants negotiate interchange rates?
Merchants do not pay interchange directly. They pay a discount rate that they can actively negotiate directly with their merchant service provider. Interchange is a mechanism that helps manage a worldwide system made up of thousands of merchant services providers and issuers, as well as millions of merchants and card holders.
- How much revenue does my merchant services provider gain from interchange?
Interchange is the transfer rate paid by the merchant services provider to the card issuer for the vast majority of transactions. For ATM transactions, interchange flows in the opposite direction, from the card issuer's bank to the acquiring bank. It is part of the financial institution's cost structure.
So the merchant services provider makes zero revenue on interchange!
- Should I always go for the lowest rate my provider will offer?
On the surface, it makes sense to get the lowest processing fee one can negotiate. However, merchant services providers have ways of increasing your effective rate through non-qualified transactions. The best way to negotiate your discount rate is to look at the effective rate. This is the rate you pay based on the total fees divided by what was processed. It is not uncommon for a merchant to switch for a lower rate, only to end up paying more in total fees.
This is why it is extremely important to have a sales representative that clearly answers all your questions and goes over your fee schedule in detail. Take your time and understand the pricing structure and how your provider will charge you for all types of cards (credit, debit, reward, world, purchase, business, hand-keyed, swiped, etc.).
Frequently Asked Questions on Fraud and Chargebacks
- What can I do to reduce fraud losses?
- At the point of sale, the merchant has the responsibility to check over the physical aspects of the card, including the embossed account number, cardholder name, expiration date, and customer signature. In addition, other anti-fraud measures that merchants should check include the Flying Dove hologram, the ultra-sensitive dove that is visible when the card is placed under ultraviolet light, and the “Flying V” embossed security character.
- Merchants should contact their merchant services provider to better determine what additional services could be deployed to reduce fraud and manage chargebacks. From Verified by Visa to CVV2, merchants have sophisticated technologies at their disposal to reduce fraud losses.
- Review the PCI data security requirements and immediately begin the process of ensuring cardholder information is protected.
- What should I look for to spot fraud by a cardholder?
Watch out for customers who:
Certain customer behavior could point to fraud, but remember it does not necessarily indicate criminal activity. You know your customers, so let your instincts steer you in the right direction.
- Purchase a lot of merchandise without regard to size, color, or price;
- Ask no questions on major purchases;
- Try to distract or rush you during a sale;
- Make purchases, leaves the store, and returns to make more purchases;
- Make large purchases right at opening or at the last minute when the store is closing; or
- Refuse free delivery for large items.
- What should I do if I suspect fraud?
- Hold on to the customer’s card if you think you can do so safely.
- Follow your company’s procedures and notify the authorities.
- Call your voice authorization center and request a “Code 10” authorization, using a normal tone of voice. An operator will tell you what to do.
- Never risk your own safety or the safety of others in the vicinity!
- What is a copy request and a chargeback?
A copy request, also known as a retrieval request, is made by the card issuer to your merchant services provider when a copy of the sales receipt is needed for a particular transaction.
A chargeback is the reversal of the dollar value (financial liability), in whole or in part, of a particular transaction by the card issuer to the merchant services provider, and usually, by the merchant bank to the consumer. For the merchant business, chargebacks can be costly. You may lose both the dollar amount of the transaction being charged back and the related merchandise. You also incur your own internal handling costs to process a chargeback.
- How can I prevent chargebacks?
Consider the following tips to prevent chargebacks.
- Do not complete a transaction if the authorization request was declined. Do not repeat the authorization request after receiving a decline.
- If you receive a “Call” message in response to an authorization request, call your authorization center.
- Make an imprint for all card-present transactions.
- Obtain cardholder signature. Make only one imprint of the card for each transaction.
- Ensure that transactions are entered into point-of-sale terminals only once and deposited only once.
- Ensure that incorrect sale receipts are voided and that transactions are processed only once.
- If your establishment has policies regarding merchandise returns, refunds, or service cancellation, disclose these policies to the cardholder at the time of the transaction.
- Deposit sales receipts with your merchant bank as quickly as possible, preferably within one to five days of the transaction date — do not hold on to them.
- Deposit credit receipts with your acquirer as quickly as possible, preferably the same day as the credit transaction is generated.
- If a customer requests cancellation of a recurring transaction which is billed periodically (monthly, quarterly, annually), always respond to the request and cancel the transaction immediately or as specified by the customer.
- Keep customers informed on the status of their transactions.
- If the merchandise or service to be provided to the cardholder will be delayed, advise the cardholder in writing of the delay and the new expected delivery or service date.
- If the merchandise ordered by the cardholder is out of stock and delivery will be delayed, or the item is no longer available, advise the cardholder in writing and offer the cardholder the option of purchasing a similar item or canceling the transaction.
- Ship merchandise before depositing transaction.