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.

Is your ecommerce business using online coupons?  Are a good portion of your sales coming from Texas and other southern states?  Well, if so why aren’t you?  A recent survey by a popular coupon site reported that 51% of coupon users came from Texas while a good portion of the rest coming from other southern states.  By offering coupons, you can increase your sales and land those particular customers that are looking for that extra discount on a great deal.   You should submit your coupons yourself to all the coupon sites like retailmenot.com and couponcodes4u.com.

You will also need to make sure your credit card processing system and shopping cart can handle coupons. When I first read this report, I thought maybe Texas was at the top because we do not have state income tax. But if you think about that, it doesn’t make any sense. The only conclusion I came to is we are probably a more thrifty state than everyone. Texas is a large state, so don’t lose out on a lot of business because you don’t offer any coupons. 5 or 10% off or free shipping coupons are ones that can do a lot great work for you.  We are located in Texas and I myself generally look when buying something online.  It takes  a second or two to see if you can find  a coupon.  If you do, it makes you feel like you just received a present.

I was talking to a local ice cream parlor and asked them why they don’t do gift cards instead of gift certificates since gift cards sell a whole lot better.  This is the reason she gave and I quote.  “The biggest reason is because when I swipe a gift card to load money on it, the company in which we had the gift cards through automatically took that amount out of our bank account. We do not ever see that money until the gift card is redeemed, which for us can become an inconvenience since we run this gift card promotion in the holidays when business is slow. Every company does these kinds of promotions to increase their cash flow, but if they take it right out it accomplishes nothing.”

I responded to the merchant by telling her this makes no sense at all to me. I have never heard of a gift card company working this way. The job of the gift card company is to store all the data for you, that’s it. You would collect the money from the client using whatever payment method they want, such as cash, check or credit card. You then load that money onto the card per say, or simply tell the gift card company this card number has X amount of “pretend” money. When the customer uses the card, that amount is subtracted from the pretend balance with the gift card company.

In short, be sure your gift card company doesn’t work this way. After all these years, I have never heard of a gift card company doing this, but apparently there is at least one. Ask your credit card processing service provider who they work with and how they operate.

Credit card fraud is big business.  Where should the blame fall?  Fraudulent transactions are twofold.  Individuals are responsible or should be for the physical presence of their cards.  When they lose their credit card, it places a burden on some unlukcy merchant.  The second fold is the merchant.  There are things merchants can do to help prevent fraud.  One important technique retail merchants can do is ask for  a customer’s ID when processing a credit card transaction.  Keeping an eye on chargebacks is very important for any merchant.  If you receive too many chargebacks, you will have issues with your credit card processing provider. Retail merchants can also compare the signature on the back of the card to how they sign the receipt. If there is no signature line present on the back of the card, ask the cardholder to sign it. Also, watch their behavior, do they seem nervous or acting funny? A lot of fraud happens online too as making a fraudulent transaction at a retail store takes more guts than making a purchase on the Internet.

Groove commerce released an article today about the check out page for ecommerce sites that I found helpful.  Heather made some valid points.  She evaluated countless retailers and how their checkout page was setup.  Many  retailers had 5, 6 and even 7 pages to their checkout process.  This isn’t something I have really thought about all that much, but it makes sense.  How many pages you have during the checkout process can be critical.  Pretend you are at the grocery store trying to checkout.  How many obstacles would you put up with before giving up and leave the store empty handed?  For online shopping, having to go through page after page to checkout, can be similar to that situation in a retail store.  We all like everything to happen quickly and easily.  Heather gave several examples of the shipping page and how it varied among 4 ecommerce sites.  I totally could see how one form was much more appealing to fill out vs another.  She gave an example of a site that asked for coupons or certificates on an exclusive page, which doesn’t warrant it.  She also mentioned that many sites collect the credit card processing information on a page that may or may not have any security logos. She made the comment that you should display these security logos before you even checkout, so consumers know that their information is protected before they even get started.

Maintaining good chargeback ratios should be on the minds of every merchant. If a merchant has one chargeback for every 10 sales they have, this isn’t good anyway you look at it. Visa/MasterCard both have chargeback monitoring programs to watch merchants that have excessive chargebacks. Finding yourself in one of these programs will come with hefty fines and having your credit card processing company terminate your account. MasterCard’s requirement for their chargeback program is 50 chargebacks and 0.50% of transaction volume in a calendar month. Visa’s is 100 chargebacks and 1% of transaction volume. MasterCard relies on the acquirer to self-report any merchant that meets their criteria. Whereas Visa does their own reporting. They use the merchant’s DBA name, volume and transaction amounts and are automatically placed into their program if they meet the criteria. It is recommend that all merchants keep aware of their chargeback ratios. If you have too many, you could find yourself in deep trouble or worse, without the ability to ever accept credit cards again. So regardless if you process $50K or $500 million a month, keep an eye on your chargeback count. The key here is to ensure customer satisfaction and avoid fraudulent transactions as much as possible.

Business.gov released some tips on how a seasonal business can thrive all year long.    Manage your invoicing and make sure you receive payment from all customers so it doesn’t hinder you during the slow months.  The SBA offers loans for seasonal businesses that need the extra capital to run their business during peak times.   Try to come up with other ways to sell your products during the slow periods.  Be creative and come up with new ideas, products or ways to use your products during your non-seasonal time.  This particular topic will require some thinking and creativity.   Also, make sure your credit card processing fees are affordable during the non-seasonal time as well. If for example, you are a Christmas tree vendor, then your time is only about 6 weeks out of the year. Having fees throughout the rest of the year may be too expensive. Another idea would be to create another business you can do on the side during the rest of the year that could be a supplement.  Such as you could have a tree farm selling regular trees that people buy in the spring, summer & fall times.