How to Choose A Trusted Credit Card Processor

There is a lot to keep in mind when you are investigating credit card processors. Picking a feasible merchant processing partner is a complicated and labor-intensive process that needs you to study multiple pricing designs and clearly comprehend your possible processor's conditions and terms.

The procedure is made more burdensome by the risks of encountering deceitful practices or scams created to rip you and your consumers off. Understanding and being aware is half the fight. Awareness of the most typical kinds of these rip-offs can secure you from stumbling into a bad scenario.

Low-Risk Wholesale Processing

One of the most typical scams you might experience involves an unsolicited offer of "wholesale processing," generally accompanied by a message that you've been designated a "low-risk" organisation.

You may receive a message from a credit card processing sales agent that says something like, "Your organisation has actually been designated as low risk by Visa and Mastercard. You now receive wholesale processing." There are several problems with a declaration like this.

Initially, Visa and Mastercard are not in business of identifying low-risk services. The charge card processors are the entities that determine whether a particular company, industry or item is high threat. Stripe recently started offering credit card processing services to the legal cannabis market. Considering that the processor considers that industry high risk it charges higher rates than it does to services in standard markets.

A lot of charge card processors and payment aggregators preserve a list of "prohibited merchants"-- the types of business they won't work with. Nevertheless, there are no lists of "low-risk merchants," and they certainly haven't been identified by Visa or Mastercard.

Does this refer to interchange-plus rates, a pricing design that leading credit card processors use to all clients? Or does wholesale processing mean the processor is going to charge you the interchange rate plus the processor's markup? For more information on credit card processing rates models, see our purchaser's guide on how to choose a credit card processing partner.

Negotiated Lower Rates

A similar fraud includes an unsolicited message from a credit card processor that recommends it has actually in some way protected lower rates with the credit card network and is passing the cost savings on to you. The message may read, "We have worked out lower rates with Mastercard and Visa and are prepared to offer you chosen interchange rates."

There are a couple scenarios where a credit card processor may secure lower rates with the card networks, but a message like this (specifically unprompted) is typically a warning. Unless your business processes more than 82 million transactions a year and more than $5 billion in sales volume each year, you would not qualify for lower interchange rates.

The only other way to protect lower interchange rates would be to prosper in a class-action suit against the card networks, and you would definitely be aware if you were celebration to a fit that large.

Force Authorization Scams

When a consumer's credit card is declined, the force permission feature permits a merchant to press a transaction through even. Basically, force permission allows a merchant to contact a consumer's bank and acquire an authorization code to continue and bypass the decline with the credit card transaction.

Some consumers can use a fake authorization code to shift all the risk of the transaction to the merchant. Usually, a customer will recommend the decrease has actually happened before and provide a string to the merchant to put in the override field.

Other things to be careful of besides merchant account processing rip-offs

The above are examples of straight-out frauds, however there are other common practices throughout the payment  processing market that you must understand. These practices are not necessarily scams, however they can leave you holding the bag all the same.

Merchant Account Application or Merchant Account Contract?

Many credit card processing companies require businesses to submit an application before partnering with them for debit and credit card transactions. However, this application is in fact part of the contract, meaning that if you sign it, you are immediately partnered with that credit card processor once the bank's underwriters authorize your application.

To put pressure on you, some representatives will recommend they can't offer you a pricing quote till you fill out the application. Others won't fill out pricing info in the application prior to giving it to you. Normally, the application/contract technique indicates you will not have a chance to evaluate the whole contract either. A full credit card processing contract includes the application, regards to service and program guide, all of which you need to be able to review before choosing to partner with anybody.

Avoiding this trap is relatively simple. Simply decline to sign anything until you're prepared to choose your processing partner. You need to likewise avoid giving out any business bank account numbers until you've made a purchasing choice.

Merchant Rate Increases

Another significant reason to examine the full agreement prior to signing up with a merchant services provider is that a great deal of them permit sales reps and agents to raise their processor's markup rates at their own discretion. This implies they can estimate you a low rate to get you to register and after that quickly trek rates in accordance with the agreement you signed.

To prevent baseless rate increases, just sign up with a processor that uses (or is willing to work out) month-to-month merchant account terms. This will enable you to leave a processor that acts in bad faith or renegotiate your terms when the month comes to an end. If you sign a basic three-year contract that consists of a rate-hike provision, you are stuck to the processor until the close of your contract-- unless you want to pay a large early termination cost.

Equipment Leases

Lots of credit card processors extend equipment leases to merchants that sign up with them. They typically bill these leases as a method to minimize overhead by preventing the purchase of your own processing equipment and should be avoided. Point-of-sale systems ( POS ) and credit card terminals are normally not that costly and many merchant services companies like FinTech Merchant Accounts provides free equipment placement that includes data mining. Many merchant have paid thousands of dollars for equipment that only cost a few hundred bucks.

Choosing a Trusted Credit Card Processor

The very best way to prevent succumbing to frauds and dubious merchant services processors is to partner with a trusted credit card processor and do your due diligence in evaluating the contract prior to you sign it. Always have an attorney look at your contract too if you can, because they may capture specific terms you weren't even searching for. If you need help finding a merchant account processor that uses genuine services and won't provide you the runaround, check out Fintech Merchant Accounts 

Edward Corona is the CEO and Founder of FinTechMerchantAccounts.com which specializes in approving High Risk Merchant Accounts, and ACH & e-check Payment Processing. @EdwardCoronaCEO