Information on Merchant Accounts,
Ecommerce and Credit Card Processing

June 12th, 2006 by Jamie Estep

Credit Card Truncation Deadline Approaching

Filed in: Merchant Accounts |

Credit Card Truncation, which is the removal of all but the last 4 digits of the credit card number and the expiration date from the customer’s transaction receipt, has been implemented successfully for quite a while now. Until now under Visa and MasterCard policies, existing businesses weren’t required to comply with truncation, but on July 1st, 2006 all businesses whether new or existing must comply with the credit card truncation requirements.

Visa and MasterCard penalties are as follows:
1st Violation – $5,000
2nd Violation – $10,000
3rd Violation – $25,000
4th Violation – $50,000
Willful or Egregious Violation – $500,000/month

There are only a few weeks left to make sure that your terminals or software is truncating. Hopefully everyone is compliant, but those who aren’t will most likely temporarily lose the ability to process credit cards, until they are compliant. We saw the exact same thing happen with a few major banks about two years ago when several older terminals were phased out, and merchants lost their ability to process with very little warning. July 1st is quickly approaching.

June 8th, 2006 by Jamie Estep

Online Check Drafting – Not ACH

Filed in: Ecommerce, Merchant Accounts |

I just learned about a system that I was unfamiliar with for online businesses. It is called check drafting. Now my first thought was that check drafting was just a fancy name for ACH (Automated Clearing House) bank drafting, but surprisingly it was different.

Check DraftCheck drafting works very similar to the ACH system. ACH is essentially an electronic method to debit a checking account. Check drafting does the same basic task, but there are a number of benefits offered by check drafting that makes it superior to ACH. The main benefit of check drafting over ACH is more protection to the business accepting checks through the check drafting system.

ACH chargeback system:
ACH is governed by the NACHA (National Automated Clearing House Association). NACHA has some very stringent regulations and consumer protection is similar to credit card processing companies. Customers can request a chargeback over the phone, and like credit cards, they have 180 days from the time of their purchase to make a chargeback. Anyone who has dealt with chargeback fraud, or just Chargebacks in general, knows how difficult it can be to win them, even when no wrong has taken place.

Check drafting chargebacks:
Electronically debited transactions through the check drafting system take only a few days to enter the businesses bank account. Unlike the ACH system, check drafting also offers much better protection for a business.

  1. A customer must go to their bank and fill out an affidavit to claim that the draft was a fraudulent transaction. The customer has 30 days from the time they receive their statement to do this.
  2. The customer’s bank then requests that the processor explain their position (why the customer was billed).
  3. When the processor authenticates that the customer authorized the draft, the bank will not allow the chargeback and the merchant will not be penalized.
  4. The advantage here is that check drafting allows you the option of refunding the money. The money stays in your account until the issue is resolved; unlike an ACH, where the money is automatically returned to the customer or frozen. You create goodwill with your customers because you are able to address these issues, as they occur, placing you in a proactive position instead of the reactionary situation that is created with an ACH.

Integrating check drafting into a website:
The check drafting system uses an API (application programming interface) similar to a good credit card payment gateway. The benefit of using API integration for any purpose is that your hard earned website visitors don’t ever leave your website. The check drafting system integrates seamlessly into an existing website, and allows customers to pay with a check in addition to any other offered payment methods. The system also offers a virtual terminal that allows the manual keyed entry of checks, making check drafting great for businesses that take orders over the phone.

The Price:
Check drafting is about the same as or slightly less expensive than accepting credit cards. The benefit over credit cards, is also the greater protection a business has over Chargebacks compared to credit cards. It also gives another method to allow customers pay for merchandise or services, helping a business to provide the most convenience for their customers without paying more themselves.

We are currently setting our own company up for check drafting on our website. We are also beginning to sell it to customers, as we have partnered with the Giact Check Drafting company. I am a firm believer in selling only products that I would personally endorse so we are going to test it out first hand. I will post again on more specifics of the check drafting setup and the process altogether. From the response we gotten so far in only a few days on the website, and the features that I have seen, it looks like check drafting could be an excellent system.

June 7th, 2006 by Jamie Estep

We made the worst blog list…

Filed in: Industry News | 4 comments

I found a blog today that is a collection of what someone thinks are the worst blogs on the internet. I was surprised that someone has the time to write detailed reviews on what they think are bad blogs. The Merchant Account Blog coincidentally made the list which is why I’m writing this post. Normally I wouldn’t waste my time with something this trivial, but the blatant hypocrisy the author has by creating an awful blog about awful blogs is noteworthy.

In regards to the merchant account blog:

First of all, if business owners need to learn more about how merchant accounts work, they’re not going to get the information from this blog or from any blog. Secondly, most business owners just open a merchant account and don’t shop around to see who has the best blog. That would be a completely useless exercise.

I guess my tracking system is messed up since I tracked over 15,000 unique visitors, and 175 email questions, last month alone.

The simple fact is that people who are fed up with getting ripped off on their merchant accounts and business owners who need more information on a particular topic related to merchant accounts show up here to find the answer.

Why would someone search for a merchant account blog?

They wouldn’t…

People search for answers to their questions and find them here. This site isn’t a blog, because blogging is a trendy thing to do and I’m trying to get into the blogosphere on a business level.

Blogs are efficient, easy to read, easy to market, topically organized, and perfectly suited for articles and information like the ones that I write.

June 6th, 2006 by Jamie Estep

Verifone and D-Link WiFi Processing

Filed in: Credit Card Equipment, Merchant Accounts |

Here is some great news I came across in regards to WiFi processing. Verifone and D-Link are going to form an alliance to help support and push WiFi credit card processing. While it is fairly straight forward to setup a WiFi processing system, there are very few service providers that can support WiFi. Hopefully with this strategic partnership, we will see a huge advance in the availability and support of WiFi credit card terminals.

Between WiFi, Wireless, and Broadband/Ethernet/IP processing, I think that we are seeing the beginning of the end of the land-line credit card machine.

Link to the original article…

Related Posts:
WiFi Credit Card Processing

June 5th, 2006 by Jamie Estep

Motient and Mobitex No More

Filed in: Credit Card Equipment, Industry News |

I just found out about some very important news that is highly relevant to anyone using a Nurit 3010, a Nurit 2090 or any other wireless terminal that operates on the Motient or Mobitex networks. In a few months, all Mobitex and Motient network terminals will be unable to process on those networks. Essentially the networks are being shut down for wireless processing. Wireless terminals will only be allowed to operate on the Cingular GPRS network, and soon the Verizon CDMA network. The GPRS and CDMA networks are much more reliable with better coverage than that Motient and Mobitex networks. All Nurit 3010 and Nurit 2090 terminals will be obsolete when the switch is made. Nurit 8000 terminals that do not operate on the GPRS network will also be obsolete.

Because of this recent news, I strongly advise against buying any wireless terminal except a Nurit 8000 GPRS, or a Verifone VX terminal that processes on the GPRS and/or CDMA networks. Additionally, due to the acquisition of Lipman by Verifone, we can expect some major changes in the Lipman product line, and we may possible see Verifone dissolve Lipman into the Verifone product line completely.

June 2nd, 2006 by Jamie Estep

Where to get Ecommerce Help

Filed in: Ecommerce |

In the age of Do-It-Yourself, it is often difficult to find places to learn how to Do-It-Yourself. This is especially true with areas of ecommerce. There is so much information out there, that finding exactly what you are looking for can be a daunting task.

The best place to find real ‘tested’ knowledge, is to find people who are already doing what you need to do. I personally try to answer questions on the blog, but the sheer quantity of questions I get, and the fact that only a few people would be interested in many of them, prevents me from answering them publicly.

One thing that I have learned in years of working on ecommerce systems and helping my customers with their ecommerce needs, is where to find good information. Whether it is programming specific information, or general business relate there are a few places that I refer to, when I need help or want to give advice.

Discussion forums are the best place to find professional, objective, and accurate information on just about any topic. Once again, with literally thousands of discussion forums out there, which one should you go to.

Digitalpoint: This is by far one of the best forums out there. It isn’t as old as some of the forums around, but it has a huge member base and a ton of very knowledgeable professionals. I have rarely seen a question go unanswered here.

Sitepoint: While I don’t spend a lot of time at sitepoint, it is still one of the best. Like digitalpoint, sitepoint has a huge amount of professionals willing to give advice. Sitepoint also has some very good articles and information. Sitepoint does have some annoying pop-ups and advertisements, but the quality of content negates any negatives that I have seen.

Webproworld: I moderate at webproworld, and while it isn’t quite as active as digitalpoint or sitepoint, it has a number of professionals that you wont find anywhere else.

If you have a question related to the internet, marketing, business, ecommerce, or something related and you cant find an answer at one of these forums, you probably wont be able to find the answer. There are plenty of other great forums out there, and I’m not saying that these are the best out there. I’m saying that I find them to be the most usable, with the best information and contributors.

June 1st, 2006 by Jamie Estep

Cutting the middle-man, who is it best to process with?

Filed in: Merchant Accounts |

I was recently posed with the question of how a business can bypass all of the middle people in the payment processing industry, and go straight to the credit card companies. This post is briefly in regard covers that question and also covers who the best company to process with is.

Processing Flow Chart

First off, it is not within the spec of my knowledge to accurately discuss negotiating directly with Visa or MasterCard, if it is even possible. Any company that is large enough to go straight to them, would have to be processing in the hundred of millions to billions of dollars per year. If your company is smaller than say Paypal, Visa and MasterCard wouldn’t even pick up the phone.

So, who is the best company to process with?

This depends on two factors, what you are looking for in a processing company, and how big your business is. If you want the absolutely lowest cost possible at the expense of any decent service quality, then going for a middle sized ISO, that offers some absurdly low processing rate is probably the way to go (You can find these companies on EBay). On the other hand if you have ever had problems that your ISO couldn’t fix in a reasonable manner, or you want to quality service that you can stick with, a good MLS, or a good mall to medium sized ISO is the way to go.

If you ever do have problems with your merchant account, and your ultra cheap provider is slow, or generally bad at getting the problem fixed, then I guarantee that you will wish you chose a better provider.

When would you go straight to a large ISO?

Only when your business is very large. In my view, very large is defined as above ten million dollars per month. Based on that you can probably negotiate a very low rate with the ISO, but also get decent support from them. Smaller businesses will normally receive poor, generic support when they process with very large companies.

Getting good support from a provider:

Quality of merchant account support

From my experience, as the size of a company goes up, the quality of support goes down. This isn’t always the case, but it makes sense. Large companies generally have poor support because the cost to maintain a good support department is very high, in addition to the technology to integrate all of their departments into a single, reliable system.

The best service:
The best support I have ever seen for merchant services is from small, independent sales reps that are large enough to have their own office, but small enough to know their customers by name. These outside agents usually handle customer service face-to-face, and will show up at their customers place of business when needed. Their customers pay a little more for their services, but if you ask any customer they have, you wont hear even the slightest hint of negative feedback. But, not all businesses need their provider to show up at the slightest sign of trouble. For these businesses, processing with a small to medium ISO that has good telephone support and a personal account representative, will be more than sufficient. They will save some money each month, but not by sacrificing the quality of their support.

The worst service:
The worst service I have ever seen, is when small businesses believe that they will save money by processing with the largest company they can find. They later find that when they have a problem, the get to navigate through endless telephone menu’s only to be left on hold for an hour, and hopefully get the issue resolved because they talked to someone who barely spoke English. And, each time they call they speak to a new person.

The other major mistake people make is by looking for the absolutely lowest offer they can find. These companies offer super low rates, which often come with hidden charges, or a rate increase a few weeks after the merchant account is up and running. The bottom line is, when you shop for the cheapest company out there, you get exactly that. The cheapest company out there.

June 1st, 2006 by Jamie Estep

Shopping Cart Development

Filed in: Ecommerce |

CartI am currently in the process of developing a simple php based shopping cart system. What differs my shopping cart from most other carts out there, is that my cart can be easily integrated into an existing website. It is made for smaller website’s that don’t need a full features ecommerce system. But, it will still offer the capabilities for a website to accept paypal and credit cards through a variety of payment gateways.

I am looking for a few programmers to help develop and test the shopping cart. I need to have several payment modules created that will integrate the shopping cart with different payment gateway’s.

Email me if you are a programmer that has experience developing ecommerce systems and are interested in contributing. You will get a permanent link to your website on the shopping cart website.

The shopping cart already has its own website and will be distributed under GPL.

May 31st, 2006 by Jamie Estep

Things you should never do with your merchant account.

Filed in: Merchant Accounts |

Coffee SpillJust a reminder of a few simple things that you should avoid doing with your merchant account. The first two things can get your merchant account shut down, and the second two can cost your business extra money for nothing.

Don’t Ever:

  1. Process your own credit card.
  2. Refund to a different card than what was charged.
  3. Refund cash on a credit transaction.
  4. Forget to batch.

Processing your own credit card:
This is considered a type of fraud. Never, ever, process the card of the person who signed for the merchant account. Not even for a dollar. If you need some extra money in your bank account, get a cash advance on your credit card, take out a loan, anything, just don’t expect to fill your bank account by processing your own card.

Refund to a different card than what was charged:
This is also considered a type of fraud, even though you may not know that you are refunding to the wrong card. If the customer doesn’t have that exact same card, and you don’t have a software or POS system that automates refunding a credit card, issue a store credit. Never refund to a different card.

Refunding cash on a credit transaction:
Refunding your customer is refunding your customer, right?


If your customer paid with a credit card and they you need to refund them, refund to the card they used to make the purchase, and only to that card. Some online and PC based software systems retain credit card information so that you can issue a refund without seeing the card again. If the customer doesn’t have the card, and you don’t have a system that automates the process, you can issue store credit.

Giving a cash refund on a credit transaction, opens you up for a chargeback that you cant win. After you lose the chargeback, you just lost 2 times the amount of the purchase, once for the cash refund, and once for the chargeback.

Forget to batch:
Forgetting to batch out your transactions daily will cause them to downgrade. It also increases the amount of time that it takes for your transactions to be deposited into your bank account. Downgrading can more than double your cost for processing that transaction. Many businesses are setup to automatically batch each day, and other need to manually batch every day that they process credit cards. Don’t be one of the businesses that realizes that you haven’t been getting your money for two months, because you haven’t batched out your terminal.

May 30th, 2006 by Jamie Estep

Guide to Merchant Account Affiliate Programs – Part 2

Filed in: Ecommerce, Guides, Merchant Accounts, My Favorite Posts |

There are probably thousands of merchant account affiliate programs on the internet. Because of the lack of a solid internet foundation that most merchant service providers have, most of these programs are completely worthless.

Affiliate Program Key Areas:
There are a few key areas that an affiliate should look for when finding a program to join. To get paid a commission whether pay per lead or pay per account, your referral is going to have to fill out an application on the provider’s website. The website and the way that the application form is setup are the biggest factors in turning your leads into commissions. A visitor needs to instantly be able to trust the provider’s website. The website should be clean, professional, and well established. An important fact about merchant services is that online applications are not the actual application for a merchant account. The longer the application, the less likely it will be for a visitor to fill out the application because they will have to fill out another application at some point. Make sure that the affiliate program’s website is above average in appearance and professionalism, and it has the shortest application form possible. If you have the time and/or knowledge, investigating things like rates, customer satisfaction, and business history will help you to find the best program, but these time intensive tasks are not mandatory to find a decent program.

Where to find a merchant account affiliate program:
There are several ways to find reputable merchant account affiliate programs. Affiliate networks have a few programs available, but most merchant service providers use in-house programs. By finding a good merchant account provider, you can then look to see if they have an affiliate program available. This way, you can ignore any potentially poor merchant account affiliate program right from the start. The most common affiliate networks, are commission junction, shareasale, and linkshare. As far a merchant services go, commission junction which is normally the leader in quality affiliate programs, only has one provider. Shareasale and link share have a few, but the majority of programs are in-house operated.

Affiliate Networks vs. In-House Programs:
Affiliate networks are great because they are a third party that helps to maintain the integrity of an affiliate program and all parties involved in it. Affiliate networks ensure timely and proper payouts, and help protect all parties from fraud. In-house programs are run by the companies receiving the application. Make sure that if you do decide to go with a company’s in-house program, that the company has a very good reputation. There is very little recourse for affiliates that are scammed by in-house affiliate programs.

Affiliate Program Getting PaidGetting Paid:
One very important part of the affiliate program is how to get paid. Make sure the affiliate program you are interested in offers acceptable payout methods and amounts. I have seen a few programs payout only when commission reaches $500. While every affiliate would love to be getting $500+ checks each month, the simple fact is that most affiliates aren’t going to reach $500 in a reasonable amount of time. Unless you know from experience that the minimum payout is an easy target, look for a more reasonable $100 or less minimum.

Programs that I have found with reputable companies:

Pay Per Lead:

The Merchant Store Inc. – This is my company’s affiliate program. We offer $20 per lead, and 3% for equipment sales that our affiliates generate. We have both a shareasale program and an in-house program. By using 2 programs we can offer custom affiliate partnerships with select affiliates or affiliates with special needs. We have been in business for over 10 years.

Electronic Transfer Inc. – Offers $10 per lead and performance incentives for well performing affiliates. Electronic Transfer Inc. has been in operation since 1989.

Pay Per Account:

Merchant Accounts Express – Pays $80 / approved merchant account. Over 8 years of operation.

Paynet Systems$50 – $100 per approved account.

Ecommerce Exchange$50 / approved account. In operation since 1989.

3rd Party Processing Programs:

Paypal – You will receive an initial monthly bonus, equivalent to 0.5% of the new merchant’s net sales, as soon as that merchant reaches $200.00 in sales. Every 30 days for the next 12 months, you will receive a bonus of 0.5% of the new merchant’s monthly net sales. The maximum total bonus you can receive is $1,000.00. – All referrals earn $9, every third referral earns an additional $5.

Related Posts:
Guide to Merchant Account Affiliate Programs – Part 1