Information on Merchant Accounts,
Ecommerce and Credit Card Processing

August 18th, 2005 by Jamie Estep

Avoiding a Bad Merchant Service Provider

Filed in: Ecommerce, Merchant Accounts | 14 comments

There are literally thousands of organizations that can set you up with credit card processing. Of these thousands of businesses, there is a large percentage that is out there just to take your money. Finding a good merchant service provider is nearly as important as accepting credit cards itself.

Start looking for a merchant account several months before you actually need it. Trying to desperately get setup in a hurry is the most common way businesses get locked into expensive contracts with poor providers.

A Bad Provider:
A poor merchant service provider will get your businesses setup to accept credit cards, but with poor service and at a more expensive price than a good provider. Poor providers often only focus on how cheap they are. Cheap prices are often synonymous with cheap quality services.

‘Cheaper’ is only a relative term in the processing industry. No provider is ever offered a significantly lower buy rate on the products and services that they sell. This means that since everything costs about the same to all providers, all providers need to charge about the same for their services. If a provider has much lower rates, then they are going to make the money up somewhere else. It’s that simple.

A poor provider will usually solicit you in some way either spam email, telemarketing, or direct mail. If their service is that great, you would have found them and not the other way around.

They will almost always try to push leasing equipment and quote you huge prices on purchasing equipment. Purchasing equipment is always cheaper than leasing. This is further illustrated in this post: Why would you ever lease processing equipment?

A Good Provider:
A good provider is a company that has been in business for long enough to have good experience with every possible type of business. The merchant service industry is very competitive, and a business that has been around knows what they need to do to provide a good service.

Time doesn’t lie in the processing industry.

A good provider will be upfront with everything that you ask them. They will list all of the fees you will be charged, explain what they mean, and negotiate with you where they can if you are unhappy with their proposal. They will only charge you the fees that are required. Those ‘miscellaneous fee’ blocks on the application will be blank and they will never have an application or setup fee.

A good provider is also there to help you if there is ever a problem with your merchant account. Problems aren’t common but chances are you will have at least one at some time, especially if you are a new business. They will have some form of 24 / 7 technical support, and they will assign a single person to your merchant account who you can talk to directly if you ever have problems or questions.

Their advertised fees may not be the lowest on earth, but they are competitive and their service quality will make up for any pennies you would save otherwise.

When you talk to them for the first time, you should not feel any pressure to sign with them. It should be a comfortable conversation, and they should ask you questions about your business and history. This is a good time to clarify any questions that you have about their company or processing with them.

How To Find One:
The best place to look for a good provider is the internet. You can easily browse through provider websites without ever committing yourself to anyone. You should also research any company that you are considering to ensure that they are who they say they are and that they have good history. Check their business information with the BBB, Hoovers, and look for any negative websites, and reviews of them. If they have an entire website devoted to how terrible they are, they must be doing something wrong.

Hoovers –

Talk to a representative from the company. Find out how long they have been in business, if they ever raise your rates themselves, and how many customers they have processing with them. If they claim to have hundreds of thousands, they are probably quoting you numbers from the company who provides the processing back-end and not their own figures. Again, this is a trust issue. Rates should only be raised due to an interchange increase. This is an across the board increase from Visa or MasterCard and is charged to everyone. Make sure their policy is to not raise rates except for interchange increases.

Nothing happens overnight in the processing industry, so don’t get dragged into a contract with a 3 days only sales line.

Request them to fax you an application. You are still under no obligation just because you got a fax from them. Look it over, and see what they are charging you for. Look for things like miscellaneous fees, monthly fees, and yearly fees. These are what some providers use to make up those extra dollars for their too-low processing rates.

Look at the post ‘What does all this mean? – Merchant Account Fees‘ for descriptions and information about fees on the application.

If you have questions, you should call them and have anything clarified. This is also a good check to ensure that you can get a hold of someone. Make sure you can reach a real person even if it isn’t the same one who sent you the application. If you can only get an answering machine and it is normal business hours, find someone else.

One last thing is ‘Early Termination Fees’. Unfortunately some very good processors have early termination fees. You should always ask if this can be waived. Sometimes it can, and sometimes it cant. At the very least, make sure you know exactly what it costs, how long it lasts, if it is recurring, and any provisions that go with it.

If at any point you feel uneasy about the company, you feel pushed, or you feel like the provider isn’t being 100% up front with you, find someone else. It’s not worth loosing your time or money over.

14 Responses to “Avoiding a Bad Merchant Service Provider”

  1. dee March 30, 2008 at 2:16 pm

    Do you have any more current info on merchant accounts. Do you know if their is a list of either the good ones or the bad ones? Thanks

  2. E Goldberg October 2, 2008 at 2:27 pm

    I have recently closed a merchant account with Moneris. They have a clause in the contract which says they will charge an early account closing fee if you do not make it to the full 3 year term of the account agreement. In addition, they say they automatically renew the agreement every 3 years. I had my account open for 5 (five) years before closing it. They charged me $250 for early closure because I didn’t close it within a month of the 3 year anniversary. I understand when a company has startup costs (like ISPs putting in wiring/router, etc. or cell phone providers paying for new phones every two years..), but I owned my equipment before starting with Moneris and cannot understand what ethical basis they could possibly imagine for charging me. Before closing the account, a telephone representative said there would likely be no charge. A month later he was proved wrong. Questions and complaints have led nowhere. This seems like a good place to air notice to potential and current customers that Moneris unethically charges excessive early termination fees on automatic renewal of contracts.

  3. merchant account services October 14, 2008 at 11:31 am

    thanks for this useful info.thiswhat sets apart the good from bad merchant acct service add up, a good merchant account system keeps meticulous record of every transaction made at your store using a credit or debit card. With a push of a button, you can extract any information regarding these purchases: the time the transaction was made, the credit card number and what the purchases were.

  4. n m November 28, 2008 at 3:15 pm

    When they have a moneris termination fee — dont terminate!!! Stay till you can terminate for free.

    Get your new set up with your new provider and stop using their machine now. If they have a minimum charge during the contract just pay that — its much cheaper then the terminating charge.

  5. Mark April 1, 2009 at 9:59 pm

    One of the best ways to ensure peace of mind is referrals. If your representative is reputable, then your rep should provide access to another customer without concern.

  6. Concerned April 2, 2009 at 2:21 pm

    I was being charged nearly 3% with Moneris for Visa rates. I had a gentleman call me from Conquest-Financial and I was not too happy to deal over the phone, but was interested in receiving a quote. I have recently switched over and in difference between this year and last year I saved over FOUR HUNDRED DOLLARS that month! I’m not sure if anyone else has contact with this company but I think they run a Toronto office. My rep I was given was code 2265 if inquiring. I don’t really want to give away any names. I run a cafe in northern Ontario.

  7. Sean Simpson April 6, 2009 at 9:40 am

    if traveling to Africa & South Africa – a word of advice, do not use MTN as a mobile service provider. Your frustration will get the better of you.

  8. court April 22, 2009 at 7:59 pm

    some really useful information, thanks

  9. Linda Graham May 1, 2009 at 5:31 am

    Good info,I only wish I had found this before we changed providers.We were called and listen to the pitch and are having so many problems,I’m not sure what they are doing is legal.

  10. colleen May 4, 2009 at 10:30 pm

    Card Service International blows dog. Stay away from these schysters.

  11. merchant services October 30, 2009 at 1:17 pm

    The merchant services industry can be very complicated from the transaction process to the pricing. Honest and relible merchant service reps, I hate to say it, are hard to come by. Here are a couple of things to consider:

    The lowest % offered may not always be the best percentage for you.
    For example, Lets say you have an average ticket under $15.

    A low rate of 1.75% may not be the best option for you. Due to the transaction fee of $0.25. In all you would pay about $0.42 for a $10 transaction.

    Visa/MC offers a different cost structure for those low average ticket businesses. If a rep doesnt know this you will only see them offer the program above.

    However, you would be much better off paying the higher 1.85% and getting the lower $0.15/trans, giving you a total cost of $0.34 on a $10 sale.

  12. Ernest Martin November 5, 2009 at 5:38 pm

    Thanks, I recieve an e-mail from a middle man that said Moneris was a great way to go. I’m just trying to get my business off the ground and don’t need to be rail road with high MA fee’s. This info was an eye opener. Thanks again

  13. Nick Bentley February 8, 2010 at 4:33 pm

    One red flag to look out for is quoted rates displayed on their site. Those are always teaser rates that adjust upward in six months or a year to something sky high.
    There’s no way to tell someone what their rate will be until they know what their business is, type of swipes, monthly volume, and credit.

    It’s like adjustable rate mortgages, and one of the sleazier tactics being used out there. Also it’s worth asking because some places will pay your early termination fees when you switch to them.

  14. DL Cordre February 25, 2010 at 8:48 am

    Where can I find unbiased impoprtantion on different providers?
    Of participart note is
    Does anyone use this company or know of any positive or negative comments on them?
    Will be opening a new store in the next month and need to accept cc.