Clients ask us all the time to compare a merchant account with us to a third party provider such as Paypal and Google Checkout. So we decided to compile a comprehensive list of all the reasons why you should consider a merchant provider instead.

1. Customer Service – Gotmerchant.com strives to provide excellent customer service. This is the main reason why each merchant is assigned a personal account manager that they may call directly at any time. If you do some searching online, you may find that this is not the same with companies like Paypal. Try calling their customer service department sometime and see what kind of results you get.

2. Seamless Integration & Better Conversions - Using payment gateways such as Authorize.net allows you to offer a seamless integration within your web site.  What does this mean?  The visitor will never leave your web site during the entire checkout process.  This is very important for any major ecommerce merchant.  Neither PayPal or Google Checkout allow your customers to remain on your website during the entire checkout process.   When you add a few extra mundane steps to your checkout process, it increases your chances of losing a sale.  Would you not agree having the highest conversion ratio possible is important to your bottom line?  Think about it from a retail perspective.  How quickly do consumers get irritated sitting in line at the register waiting for their turn?  The longer they wait, the less satisfied they are.   This is no different with Internet shopping.  You want your checkout process as easy, quick and simplified as possible.  Give a customer a reason to abandon their cart and they will.

3. Underwriting - Unlike third party providers, all merchant account providers send their applications through an underwriting process.  This is where a human reviews the account and evaluates it for risk and determines if the business type is acceptable.  Obviously there are certain business types merchant providers will not take, such as adult related businesses.  The list of unacceptable merchant types will vary though from one provider to the next.  There are also many stories available online that start off with something similar to,  “Paypal froze my account.”  This should be expected more often as they instantly approve accounts and ask questions after the merchant starts processing.  According to some information found online, once an account gets held, Paypal can be difficult to reach, especially their risk management department.  It is also said that their call centers are located overseas whereas most merchant providers keep that within the USA.

Something else to consider is the chargeback process.  With Paypal, consumers have two opportunities to dispute a charge, known as a chargeback.  They can dispute the charge with Paypal directly.  If  Paypal rules in the merchant’s favor, they can then dispute the charge with their credit card issuer.  At this time,  Paypal is at the mercy of the card issuer like the rest of us merchant providers.

4. Deposits - Paypal deposits your money into your Paypal account and you then must manually withdraw your funds.  Whereas merchant providers automatically deposit your funds directly into your checking account and this results in much faster funding times.   This doesn’t apply to Google Checkout however as they also make direct deposits.

5. Paypal’s Reputation - Many businesses and consumers refuse to use Paypal. This could be based on a previous bad experience with the company from a consumer standpoint or as a merchant.  You should ultimately give your clients the payment method they choose.  It may be a good idea to offer Paypal & Google Checkout as an alternative option, but not your primary or only option.

In today’s environment, it is more important than ever for restaurants of all types to accept credit and debits.  According to a 2008 study by Hitachi Consulting, about a 1/4 of all transactions made at fast food restaurants are made with a credit/debit card.    If you have a quick service restaurant (fast food), how do you keep your credit card processing fees to a minimum?  When fast food restaurants have a very low average ticket, in the $5 to $10 range, everything matters. The percentages and transaction fees can add up to a big percentage and pennies matter a lot.  When your average ticket is so low, the percentage you pay is as important as the transaction fees.

Lets assume we are dealing with Interchange plus pricing. If your processor charges you 10 cents per transaction, that is 1% on a $10 ticket amount.  You would then have to add the Interchange per item fee which can range from 4 cents on up depending on the type of card you process.  You will also have a percentage to pay as well. When you have a restaurant such as Jimmy John’s that does close to a million a year in revenue, this becomes even more critical.  The best advice I can give anyone with a low average ticket is as follow:

1. Get setup using the Interchange plus pricing model instead of 3 tiered.  It is much easier to control your cost by knowing how low your processor can go as you are dealing with costs.
2. Process your transactions over IP instead of dial up.  IP processing is having your transactions submitted using a high speed Internet connection.   Not only does this speed up your checkout, but most processors can offer you lower transaction fees than if you were to use dial up.

If you have any questions, feel free to leave your comments.

Do you own a bar or a restaurant with a bar and want to give your customers the option to open a bar tab for the night using their credit card?  If so, here are some recommended procedures  I have come up with after doing research for one of our customers.  Some of these ideas and points came from other companies in the credit card processing industry and what they have experienced with their own merchants.

The first step would be to run an authorization only transaction on the card, such as for $50.  This checks to make sure the card is still valid and the funds are available.  At the end of the night, you close the tab which captures the final purchase amount and this can be less or more than the original authorization amount.  What you need to seriously consider is what does your business do to encourage customers to close their tab and sign the credit card receipt before leaving.

Listed below are some options you may want to consider.  Not all options will work with every business.  You will need to find the appropriate one for your customer base as some may not go over well.

1. Hold on to their credit card and give it back after they close the tab.    If they leave & you still have the credit card, call the card issuing bank using the number on the back and inform them that you have the cardholder’s credit card and to inform their customer. Ask them to come in, pickup their card & sign their receipt. If you do this, you may also want to ask for a drivers license and compare the signatures to ensure they are both legitimate.
2. Have a key locker similar to valet parking. You ask for their keys and place them in safe place.  You give them a ticket stub that references their keys. When they close their tab, they get their keys back.
3. Do nothing and see how much your losses are and decide if it is worth it.
4. Ask for their phone number, which you can call them if they leave without closing their tab. You may also want to ask for a driver licenses as well to verify legitimacy.
5. Ask for their drivers license and hold on to that.
6. A combination of any of  the above.

I hope you find this information helpful.  If you have any other ideas or tips, please leave your comments.

FirstData is notoriously known for using a billing method known as BillBack or Enhanced BillBack.  I recently spent about 10 minutes explaining this to two recent merchants that are currently on this type of billing with FirstData.  This type of billing is great for the agent or merchant provider as it makes it difficult for the merchant to fully understand and know their processing cost which can reduce attrition with other competitors.  However, it isn’t great for merchants on the other side of the table.  This is how it works.  You are charged a flat percentage rate on all transactions regardless of card type.  This is what you see on your current monthly statement.  You are then assessed the “billback” for all the transactions that downgraded to the higher interchange rates, such as rewards and business cards. Here’s the tricky part. They place this BillBack charge on your next month statement. So January’s processing statement has BillBack charges for December’s processing! You essentially need two months of statements to figure out your true cost for a particular month as information is spread out between the two months.

Enhanced BillBack is identical to the standard BillBack plan. The difference is the credit card processing provider adds an additional fixed percentage markup, hence the reason why they call it “enhanced.”  It enhances their profits.  Some agents including myself see this type of pricing alittle misleading to the merchant.

This isn’t easy to recognize unless you know what to look for. Normally it is listed under a category called Interchange and you will see something like: Jan BB159 or Jan EBB159. The BB stands for BillBack and EBB is for Enhanced BillBack.  This would also be on a February’s statement, since it says Jan, the previous month.