Information on Merchant Accounts,
Ecommerce and Credit Card Processing

January 6th, 2022 by J B

Another 5 Ways to Lose Money Through Your Merchant Account.

Filed in: Merchant Accounts |

  1. Not Reviewing Deposits

Most merchants think that as soon as they run the card funds are guaranteed.  Unfortunately, there are many reasons why funds may not make it to your account when you expect them to.  While most of these are extremely easy to resolve many merchants don’t catch the fact that they are missing funds until weeks down the road.  Most of the time when there is a funding delay is pertaining to a bank holiday, but sometimes it could be related to batch issues, device issues, or risk-related issues and need to be addressed as soon as possible.  When you see a deposit, issue contact the processor immediately and they will work with you to get the issue resolved.

2. Improperly handling returns

When returning money to a customer it’s important to return those funds the same way they were received.  It is also important that you use the correct device option, so you use the most cost-effective way of returning those funds.

Many merchants will accept a credit card payment and later if there is a return, they will pay the customer out in cash.  This opens the merchant up to dispute as there is no proof the customer ever received such a refund.  You also need to think about how you return funds through your payment device.

One option many merchants overlook is the void option.  If a return is due on the same day of the original transaction you can void that original transaction instead of processing a return.  A void deletes the transaction from the batch which keeps the funds from moving from the cardholder’s account to the business.  If funds never move the issuer and processor don’t charge the percentage rate on that transaction, saving the merchant money.  If the original transaction has already settled, then the only option you have remaining is processing a return which works as the opposite of a sale.

3. Not using current processing technology

If you are still swiping all your transactions, you are leaving yourself open to disputes.  When swiping transactions, a business has little to no protection against stolen credit cards.  Any stolen card accept may generate a chargeback that is unwinnable by the merchant.  This was not always the case, as before EMV swiping was the most secure way to process a credit card.  These days as more and more card processing technologies become mainstream it’s important to use the most secure methods you can.  Also accepting a wide range of transaction types also allows you to serve the highest number of customers.  You do not want money to walk out the door only because you couldn’t accept their form of payment.

4. Not using the best payment option for the transaction

Many businesses out there accept credit and PIN debit transactions without thinking about the underlying cost structure of each card type.  It’s assumed by many that Pin debit transactions are always cheaper than processing a debit card as signature-based credit.   That said this is not always the case, and many merchants could save quite a bit by being selective about which network they process their payments on.  Its starts with reviewing your statement and getting a better understanding of how you are charged for each card type.  Under a certain dollar amount, one way will be more cost-effective than the other.  Once the transaction amount is higher than that dollar amount it becomes more cost-effective to process the sale on the alternative network.  Which way is best for your business is going to come down to how you are being billed for Credit and Pin Debit.

5. Not changing accounts types based on business volume

There are a couple of primary merchant account types available these days.  There is an aggregator base merchant account and a fully underwritten merchant account.  The aggregator-based accounts generally have low to no monthly or annual fees but come with a higher flat price per transaction.  The fully underwritten accounts will have monthly and annual fees but also include lower transactional costs and personal service.

Depending on your business’s processing volume one of the account types will be more cost-effective than the other.  In general, if you’re processing an average of $2,000 per month consistently, or $24k per year even if seasonal you are better with a fully underwritten account as far as cost is concerned. 

I have seen businesses processing less than $1,000 per year who won’t let go of their fully underwritten merchant account even though it’s costing them through the nose.  On the other hand, I have seen companies processing $50k+ with an aggregator account paying 30% more than they should annually.

There is something to be said for staying with what is familiar, but you should at least know what that is costing your business.   Once you know what the cost difference is you will know if it’s worth it to you to keep with what you are doing on try something else.

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