Top 10 Mistakes to Avoid When Choosing
a Merchant Account Provider
Choosing the right merchant account provider for your credit card processing needs should be a
top priority for all business owners. Unfortunately, merchants are often intimidated by the
process and afraid of making a mistake.
An important decision like choosing a merchant account provider should involve doing research
into available options, asking for recommendations from other merchants, identifying likely
candidates, a careful comparison of products and services, and a final decision based on a
number of important factors, including the provider's experience and reputation, the package
they're offering and how well it meets your requirements and -- of course -- cost.
One thing is certain: There are plenty of merchant account providers out there from which to
choose, and they all advertise that their deal is "the best". But best for whom?
Credit card processing is not a one-size-fits-all proposition. Consequently, merchants need to
take the time to analyze their needs and outline them clearly and honestly to a potential
provider, who must then tailor a package of products and services to meet those requirements.
To ensure that the whole process goes smoothly from start to finish, consider the following Top
10 Mistakes to Avoid When Choosing a Merchant Account Provider:
Mistake #1: Go with the first provider you meet. Is that any way to create a business alliance?
Because that's what a merchant account provider is -- an ally in your business who will be
heavily involved on the financial side of your operation. That's why it's important to choose a
reputable provider with a proven track record. Do initial research online, in the Yellow Pages or
through local business associations. Ask other merchants if they're happy (or not) with their
provider. Collect names and data for your short list of candidates, then check out each potential
provider with the Better Business Bureau, or type their name into a search engine and see what
pops up. Trust your gut -- if you don't like what you see or hear, move on to the next name on
Mistake #2: Believe that "free" actually means free. You will see a lot of merchant account
providers advertising "free merchant accounts", "free terminals", "free processing" or "free
Internet gateway". When it comes to the word "free", the devil is usually in the details (i.e. the
fine print at the bottom of the page or contract.) Question any and all "free" claims with the
provider. An offer for a free trial is worth investigating, but make sure you understand all the
terms of the deal before signing up. And keep in mind that just because no charge for a product
or service appears on your statement, it may not be truly free. The cost may have been folded
into another charge, or other charges may have been bumped up a notch to make up for the
Mistake #3: Assume all fees are valid and applicable to you. As you talk to merchant account
providers, you'll discover that there are many different fees and rates associated with credit
card processing. Some, like interchange, transaction, batch processing, monthly statement and
chargeback fees, are standard in the industry and all merchants pay them. Then there are the
so-called "junk fees". Typically these include charges like file fee, security fee, audit fee,
conversion fee, over-limit fee, excessive transactions fees and billback fees. If any of these
appear in your contract, ask that they be removed or they'll show up on your monthly bill.
Additionally, once you've signed on with a merchant account provider, be sure to check your
statement each month to make sure you're not charged for services or products you're not
using. For example, if you process via the Internet and you see a charge for dialup service,
Mistake #4: Hold back information from the provider about your business and future plans.
There's something to be said for playing your cards close to your vest, but in this case it could
end up costing you money in the long run. In order to make you the best possible credit card
processing deal, a provider must have an excellent understanding of all facets of your
operation. If you're currently running a traditional retail business from a storefront but expect
to expand onto the Internet, let the provider know so they can include the necessary products
and services in their proposal. Businesses with a mobile workforce can benefit operationally
and financially from mobile or wireless credit card processing, but not if the owner doesn't
share that information with the provider. Again, the merchant account provider is an ally in
your business and wants it to be competitive and successful. Help them do their job by being
upfront about your plans.
Mistake #5: Be less than truthful on your merchant account application. The provider will
request specific information about you, your business and your personal finances on your
application for a merchant account. In addition to contact, banking and tax information, you are
also required to provide information about the type of business you operate, your processing
volume and average sales amount. Merchants who are currently accepting credit cards are
usually asked for several recent statements from their provider. A personal guarantee and
copies of your articles of incorporation and business license or permit are also requested.
Merchants who misrepresent their business or tamper with their financial information are likely
to be caught and rejected by the provider.
Mistake #6: Don't ask specific questions about the financial side of the process. Imagine not
asking about what your monthly payment will be or when the proceeds from your credit card
transactions will be deposited into your bank account! You have a right to know upfront exactly
what your financial obligations to the processor are, and vice versa. For example, will your rates
and fees change without advance notice? How soon will you have access to your funds after a
transaction? What is their policy on chargebacks? How much will it cost to modify your package
of services if your requirements change? These are all honest questions that deserve honest
answers from a potential processor.
Mistake #7: Reject any fraud protection programs that are offered. Fraud and identity theft
always happen to the "other" guy, right? Wrong! Credit card fraud can -- and does -- happen
to merchants of all sizes. In fact, there's evidence that cyberthieves, scammers and fraudsters
specifically target small to medium-sized merchants most often because they're considered
"soft" and vulnerable to a blitz attack. Achieving and maintaining PCI compliance is just the first
step in the process of keeping your sensitive information and that of your customers secure. A
reputable merchant account provider will assist in PCI compliance and offer a data breach
security program that helps offset potentially huge expenses following a suspected or actual
breach of payment card data.
Mistake #8: Wait until the last possible minute to set up your merchant account. Applying for
and getting approved and set up with a merchant account doesn't take a lot of time if you are
well qualified and prepared to provide all the necessary information. A reputable merchant
account provider can usually approve and equip you within a few days. However,
procrastination will work against you if you put off the process until just before you need to
start accepting credit cards. Credit cards are important to your business, so put your merchant
account at the top of your "to do" list and make it one of your first priorities.
Mistake #9: Don't bother to read the contract. You've already gone over the details of the
deal with your sales rep, so why waste your valuable time on the fine print? The best answer to
that question is: Protection. You are about to sign a legal document establishing a long-term
relationship with this merchant account provider, so you want to be 100 percent sure of what is
required of both parties. Reviewing the contract -- possibly with a legal or business advisor --
is the last step in the selection process, and your last opportunity to make sure the deal you
agreed to is the deal you are getting. Ask for your own copy of the contract as well as the
provider's terms and conditions or service agreement -- and then read them all!
Mistake #10: Deciding that you don't need to accept credit cards after all. This is perhaps the
biggest mistake a merchant can make. The potential advantages of accepting credit cards are
numerous: Increased customer convenience and satisfaction contributing to customer loyalty
and good "buzz", improved branding for your business that makes you more competitive in
your marketplace, higher customer conversion rates, increased customer spending, no more
bounced checks or collections, guaranteed and timely settlement with payment directly into
your bank account, new options for growing your business (Internet, mobile and wireless credit
card processing) and fewer trips to the bank to deposit cash and checks. At first blush, credit
card processing may seem like an expensive proposition. In actuality it's a business expense
that can bring in more money than it pulls out, making it an excellent investment in your
business' future. When you calculate the time and effort credit card processing saves you, it
may well turn out to be the most cost-effective payment option of all.