Information on Merchant Accounts,
Ecommerce and Credit Card Processing

April 19th, 2017 by MSI Newsletters

Rate Structures

Filed in: Monthly Newsletters |

Previously we went into a very detailed, multi-page, explanation of some different structures and we wanted to give a summarized refresher. In this article, we will focus a little time to flat rate merchant processing, tiered and Interchange plus with the primary pro and con for each.

Basics of industry pricing:

All credit card processors are charged a fee by the card issuers for moving money, called interchange. Interchange is currently made up of over 800 card and charge type combinations ranging from 0.05% + $0.22 up to 3.25% +$0.10 per transaction. The processing industry built different pricing structures for several reasons, most primarily to simplify the costs to the merchants. Now that you know a little about the basis of the structure let’s look at a couple different structures.

Tiered and Flat Rate Pricing Structures:

The tiered rate plan has always been a popular option, generally consisting of 4 or 5 different rates based on the transactions processed. Basically, the processor takes the 800+ possible rates and groups them together into buckets and charges the merchant one rate for each bucket. It’s much easier to explain to a merchant how a card type, or method of acceptance will be billed at one of a few rates than explaining interchange.

Companies like Square use the tiered structure to charge merchants based on how they accept a card. Quick example: swiped transaction process at 2.75% and keyed transactions process at 3.50% + $0.15. While is this referred to as a flat rate setup, it’s actually a two tier account. They just use the two tiers to simplify the cost of card acceptance.


Simplified fee, which are easier to understand and easier to estimate processing costs


As the merchant you can’t tell how much you’re paying to your processor and how much is going to interchange.

Interchange Plus:

This structure has been around forever, however has become more mainstream in the past 10 years. In this structure the processor doesn’t bucket anything, it simply passes the interchange cost from each transaction processed to the merchant and then separately tacks a small flat rate on top. It can be difficult to wrap your head around the idea at first, just due to the number of possible fees, however in either structure you are paying for interchange, this one just shows you what the issuer charged to move the funds.

This structure is very transparent, in that you will see exactly what you paid in interchange and what you paid to your processor. This allows you to better control your merchant processing costs, however your trading a little bit of simplicity for better control.


Almost always more cost effective, and easier to know where who is getting your processing fees

Con: It’s a little more difficult to understand, and adds some additional complexity to processing statements

So, which is better?

It’s almost always Interchange Plus, in fact there are only two ways tiered beats it.

1.The plus side of your Interchange Plus account is inappropriately high, which can be resolved by shopping around.

2.Your processor was not effective in setting up their buckets and they basically don’t have any margin on the buckets. (Quite unlikely)

I’m not saying you can’t have a fair setup either way. I have seen plenty of tier accounts that were very cost effective, however if I were looking at change providers I would only be looking an interchange plus structure.

How do I know if my current setup is competitive?

You need to start by figuring out what your total processing volume and your total monthly fees are for a given month. If you divide your total merchant account expense by your processing volume you will end up with your effective rate.

Example: If you processed $12,152.79 last month and the total fees were $392.54 you effective rate was 3.23%.

$392.54 / $12,152.79 = 0.0323 or 3.23%


Now if you are happy enough with that percentage and don’t feel like shopping around at least you know what that month costed you. If you want to shop around you now have a basis of comparison. When you receive a quote from a processor is should include an estimate of what your dollar volume is going to cost using their service and you can calculate the effective rate of that quote to compare against your own.

Something to keep in mind: The lower your processing volume the higher your effective rate maybe due more static fees. Regularly checking your effective rate against your volume is a good idea to stay on top of your effective cost.

Send us an email with your statement and let us do the breakdown for you and give you our opinion of your current setup and how your payment types are affecting your processing fees. There are many instances where changing an internal business process will do a lot to lower your effective processing costs even before changing your rates.

March 19th, 2017 by MSI Newsletters

News Briefs and Fees

Filed in: Monthly Newsletters |

News Briefs

Interchange Regulation

The National Retail Federation and the Retail Industry Leaders Association have asked the US Supreme Court to let stand an appeals-court ruling. This ruling had struck down the 5-year old Interchange rate settlement. The trade groups that represent large retailers argue that the settlement provision to allow merchants to add surcharges for credit card transactions, has done little to aid those merchants. The surcharging restrictions, which were loosened under the card-brand rules, allowed merchants to charge the lesser of the actual acceptance costs, or 4% of the transaction amount. Surcharging is currently allowed in 40 states. For now, even though the settlement has been thrown out by the appeals court, surcharging is still allowed because the card networks have not reworded their rules put in place due to the settlement.

Payment Fraud

Counterfeiting cards is still the largest type of fraud in the payment industry, but probably won’t be for long. The Federal Reserve recently released a payment study that shows, “fraudulent use of card numbers” is fast over taking counterfeiting. This fraudulent use of card numbers is another name for a card not present, web based, or internet based fraudulent orders. This is a direct result of the new EMV chip based cards that are harder to counterfeit.

Mobile Processing

Mobile Commerce now comprises 21% of all online orders, according to comScore Inc. (a based data-measurement firm). This growth is up 45% from the year before, for the 4th quarter of 2016. This shows that retailers are doing a much better job at making their sites more mobile friendly. This also foreshadows the increasing growth of mobile wallets in the years to come.

Just about every Merchant Account has monthly set fees. Some call these,“Padding Fees” and I’ve seen all kinds of names for various fees on merchant statements. What are they? Am I getting ripped off? The best answer without looking at your statement is: Maybe. It depends on how many of these fees you have, and how high they are.

More fees?  What am I paying for?

To keep an account on file or active status, it costs money to your processor. If a merchant doesn’t run anything on their account, and lets say they don’t have any kind of monthly fee, the processor or sales office is losing money. Sales offices are charged an, “on file fee” from the bank they have placed the account with. This fee can range depending on the agreement between the sales office and the bank, however there is always some type of fee. To cover the cost, most providers simply pass this on, typically as a statement fee. Over the years some started calling it a service fee or support fee and so on. Sometimes I see where a merchant is getting charged a statement fee AND a support fee AND some other type of monthly on file fee. While having one of these charges is common, if you have a myriad of these on your statement, it may be worth a call to your processor to make sure what the charges are for.

andry_at_laptop.jpgStatement Fee – (Service Fee, Support Fee, On-file Fee, Terminal Service Fee) This is a generic fee to help offset the costs of maintaining an account.

PCI Non Compliance Fee – (Non Supported Terminal Fee, Non PCI) This is in effect, a fine from your processor for not being PCI-DSS compliant. This can be removed by completing your compliance requirements, or providing a copy of a valid compliance certificate to the processor.

PCI Service Fee – (Annual PCI Fee, Monthly PCI fee) This fee covers the cost of the PCI Certification Vendor. You might be able to get this fee removed if you already have a PCI certification vendor you are working with, however most processors still won’t do it, because the PCI Certification Vendor also maintains all the PCI records for the processor, even if you are using another vendor.

Regulatory Product Fee – (IRS Reporting Fee, Reg Fee) This fee covers the cost of managing reporting requirements.

Terminal Rental Fee – (Terminal Service Fee, Rental Fee) A charge for equipment that is rented from the processor. If you have a rental fee, you should really consider purchasing a terminal, or shopping around for other processing options. Credit Card terminals are cheap, and removing a rental fee generally pays back in less than a year.

February 16th, 2017 by MSI Newsletters

ISO’s Vs. Banks vs. Agents

Filed in: Monthly Newsletters |

You had a dream, and you made it come true, you are a true entrepreneur that helps drive our country. Not only that but you call the shots, set the hours, you are the boss, which means you also really understand the saying “open a store marry the door”. While you wear many different hats when running your business you are constantly the target of business to business salespeople hungry to land their next big deal, and credit card processing companies are no exception.

When you opened your checking account, your bank told you to open a merchant account with them, on top of which you are getting 10 calls a day from merchant providers, and door to door salespeople looking for a few minutes of your time, all of whom saying they are cheaper than the last company you spoke with. One company says one thing, then you’re told another, and everyone changes back again. It’s confusing and frankly makes you wonder who would best serve you. Don’t worry, let’s calm down and start making sense of who does what and where there key focus lies. From there you will be better educated and know more about how to find the best options that work for you and how you do business.

In the processing world you have 4 basic sales channels.


Credit card processors are the back-end payment systems that process all credit and debit cards. They are the ones who handle funding your bank account. No matter who you process your credit cards through they are going to be using a processing bank to handle your money. These are usually very large organizations who build and maintain the infrastructure to handle thousands upon thousands of transaction requests per second, and facilitate countless money transfers between business owners and card issuers.

Processors are effectively the wholesalers of the industry and “can” have their own internal and/or external sales teams, which makes you feel like your cutting out the middle man and going direct. If you sign up directly with a processor, you may be technically going direct, but the processor’s sales team is in a business in itself and needs to maintain profitability. It will have roughly the same costs of any other provider you will find in the industry. You are also not going to get direct support from your sales person, but instead be given their national or offshore call center for future support.

Independent Sales Offices

Many times referred to as ISO’s or MSP’s (Member service providers), ISO’s are companies registered with Visa and MasterCard to represent a processor or processors and solicit and support merchant accounts. ISO’s vary in size from small offices to large corporations, as large or larger than processors even. Becoming a registered ISO is not cheap and requires many steps and proof of technical and financial solvency. However, they in effect the retailers of the industry. These companies are sales focused and many do their own technical support and customer service in house. They may also carry some of the financial risk and liability related to their merchant’s processing accounts.

ISO’s sales forces and support teams generally lend themselves to more personalized service than larger processors. Instead of calling a national call center with hundreds of agents, your sales or support team will generally be small, and when talking to them, you’re likely to get the same people on the line. Many times, your sales person will remain your lead support contact as well. Your salesperson and ISO will also typically act on your behalf with the processor, handling research, tracking down funding, disputes, and tracking account changes are just a few of the things most ISO’s can handle for you so you don’t have to. This may seem insignificant until you try and navigate a processor’s support system or are never able to speak with the same person, requiring you to start from scratch every time you need support.

ISO’s sales operate similar to that of the processors, however they will have much greater flexibility with account pricing and account structures. ISO’s often have less staff but much more experience and lower employee turnover than larger organizations, automatically giving them an advantage in providing support and solving problems.

Traditional Banks

Many traditional banks can technically fall into either the processor or ISO category. It really depends on the bank and how they structure their credit card processing program. To the traditional bank, credit card processing is a value add, and so many, if not the vast majority, have farmed out the handling of their merchant’s services divisions to other companies. This way they can focus on the more traditional side of banking.

With any bank, don’t expect to be able to run down to your local branch to fix any problem you might have with your merchant account. While a few banks may have that ability, you will most likely be calling into a large call center for support, and that call center might be the processor, or an ISO.

However, since you are already a bank’s customer, the likelihood that you will sign up with them without checking other options, is greater, meaning they can charge more than others in the industry and still obtain new customers. Some banks may offer to lower fees for other services, which may off set high processing costs. And while it is an illegal practice called tying, some banks may require you to process with them in order to obtain a loan or other service. In any case, with any company, we strongly suggest looking at a few different options. We’ve seen more bad deals with banks than any other type of provider in the industry.

Sales Agents

This group is much like an insurance agent, a good one is worth their weight in gold, and a bad one will make you despise everything about the industry. Being a sales agent is a relatively easy way for a person to run their own business by selling merchant accounts and it requires very little but motivation, and on the job training, to get started. With an independent sales agent, the accounts they sign up will go through an ISO or a processor who is registered with card associations and the sales agent earns commission based on the accounts they write.

Outside Sales Agents should be your sales person and your first level support person the entire time you have an account with them. It’s not only their job to get you setup and running, but they are normally very interested in making sure you are well taken care of. Having an area rep who can look out for your account individually and will come by and help solve issues in person is a very nice thing to have access to. While there are some agents out there who will sign up an account, never to be seen again, most work for their merchants and advocate for their customers as if they were their own businesses.

Generally speaking, sales agent’s hard costs can very quiet a lot, but the better sales agents will have cost and pricing options comparable to ISO’s, and may sign accounts to multiple processors. Outside agents can have even more flexibility than processors and ISO’s because they carry some of the risks of negative revenue on accounts. But, they must conform to the systems in place by their sponsoring sales office. meaning they will have limits as to what they can assist you with personally on your account. Higher level support issues are typically referred to the ISO or processor.

When using an outside agent, one should really look for an agent that has been in business for at least a couple years, and can provide reference, ideally someone local. There is a large portion of outside agents that previously worked in the processing industry and wanted to apply their knowledge in building their own business. Many of these are some of the most knowledgeable and dedicated sales and support persons in the industry.


One of the biggest areas where merchant account sales channels differ is costs for processing equipment and software. Banks and some sales agents tend to try and lease equipment far more than processors and ISO’s. While a lease in itself isn’t an end of the world situation, when you’re offered a 48 month, $100 lease, on a piece of equipment that costs only $300, you can do the math on how great of a deal this actually is.

We’ve seen a resurgence of leases in the past few years, and there are some downright ugly deals floating around. Make absolutely sure you understand the terms and the total cost of a lease and the approximate retail cost of the equipment you’re leasing. It makes little sense to spend many times the cost of equipment as well as getting stuck in a non-cancellable lease on equipment that you could easily purchase outright.


Now you should have a good understanding of the industry and where pricing comes from, and that’s half the battle. Now when you talk to a sales person hopefully it won’t sound so Greek to you. All three options work, they will all allow you to run credit cards and put the money in your bank account. You just need to decide if you like the one stop shop or are freedom and leverage with the personal touch more important. Look at multiple options when shopping for processing and always request and check references to find out where each option may have short comings. Once you know the answers to these questions you should be able to make an easier educated choice.

As always, for information on the Merchant Store’s services, or for answers to additional questions please email, call us at: (866) 937-5973, or visit our website.

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December 16th, 2016 by MSI Newsletters

Defense against the Grinch

Filed in: Monthly Newsletters |

The holiday season is a joyous occasion for businesses and consumers alike, however there is always someone out there looking to profit off of the misfortune of others. It’s easy to get caught up in the in the spirit of the season and let your guard down, but this time of year it’s important to keep focus on defending your business from the Grinch’s trying to prey on you. In this article we are going to touch on a few different methods fraudsters use and how you might defend yourself.

Friendly Fraud

Unlike its name there is nothing friendly about friendly fraud. Friendly fraud is a broad term that encompasses fraud by legitimate customers who utilize chargebacks or other systems to steal merchandise or services or cash from a business. These types of fraud can be difficult to prevent and can be nearly impossible to recoup losses on.

Chargeback fraud

Generally, chargeback fraud works when a person enters your business, or shops online, and legitimately purchases goods or services, and then disputes the charge with their card issuer. Someone who knows what they are doing can easily dispute a transaction in such a way that the business owner will most likely not be able to fight it. Card issuers determine who wins chargeback, and they inherently favor card holders over merchants. There’s no question that the customer is stealing from you but police departments are reluctant to pursue friendly chargeback fraud cases, if they’ll even accept a report on them at all. Most of the time they will refer merchants to the civil court system which is time consuming, costly, and offers no guarantee of recourse even if the merchant wins in court.

The key to protecting yourself against chargeback fraud is to stop card holders from being able to cleaim they didn’t receive what they purchased, that it was defective or not as advertised, or that the charge was not authorized by the card holder. Unfortunately for online businesses, or situations where a card is keyed into a terminal or POS system, fighting this becomes very difficult, as proving the card holder made the purchase with the card in hand is all but impossible.

To prevent this method, you will want to swipe or dip (EMV Chip) as many transactions as possible. This can also prevent other forms of fraud such as duplicate card fraud. When you swipe or dip the card your customer gives you, it proves you were face to face with the customer, which aids in supporting your case that the card holder did make a purchase. Not everyone has the ability to swipe or dip cards, or even if they do they might also need to ship products to the consumer.

For ecommerce or mail/phone order businesses, the best thing you can do for yourself is to ship directly to the card holders billing address, and preferably ship everything with a signature required for delivery. If you are shipping to an address different from the card holder’s address, you have no way of proving that they received the product. Not even a signed invoice with a photo ID attached will prove to the card issuer their customer actually made the purchase. Or, even with a delivery signature, the card issuer will usually side with the card holder. While it should go without saying, but if you’re not swiping or dipping the cards, you should be using address verification for both the street and the zip code to ensure the billing address provided by the card holder matches what the card issuer has on file. If you are not sure how to use address verification (AVS), contact your processor or payment gateway for more information. AVS is not available in some countries or specialty cards like some gift cards, and it’s not uncommon for card holders to not know the exact address they are billed at, so it’s not by any means 100% fool proof. CVV is another mechanism that should be used on all non-present transactions. It at least verifies that the customer had the card in hand at some point as duplicated cards rarely store the verification code as well as the data on the magnetic stripe.

It’s a good practice to keep a clear return policy and always be willing to offer exchanges or refunds to you customers when appropriate. Many card holders will dispute a credit card charge instead of requesting a return if they feel it’s going to be a hassle, or they feel like the business won’t accept a return or exchange in a seemingly reasonable situation. Making these policies clear from the moment of the transaction can help decrease potential chargebacks.

Gift Card Fraud

This form of fraud is quite easy, has a low risk of being caught, and effects both the business and their legitimate gift card holders. Gift cards function very similarly to credit cards and therefore share some of the same risks. The data stored on the magnetic strip on a gift card can be copied and used to make cloned cards for a fraudster to use in stores. This is just one popular method of gift card fraud. Many gift card providers offer the ability for card holders to set a PIN number on their card to help prevent misuse, however not many card holders go through these steps. In the case of any card type, gift, debit, or credit, checking the physical number on the card against the number that a terminal or POS system electronically captures can tell you if the card is legitimate. This has become a more common practice by large retailers protecting themselves from duplicated card fraud. In the case where the numbers do not match, calling the police may be the best option, as there is a high likelihood the customer is trying to make purchases with a fake card.

Another risk that pertains primarily to gift cards is through credits or refunds. Crediting a gift card works differently than a credit or debit card as some cards will automatically receive the balance of a credit when it is run by a merchant. When this happens, the balance of the card is instantly increased by the amount returned to it. While that doesn’t sound like an issue, it gives you, the business owner, no time to identify accidental or fraudulent credits or make corrections. Funding a gift card by mistake gives the card holder time to spend those funds before you can correct the mistake, or even settle your terminal, and can lead to the card issuer disputing your attempted correction later. There have also been cases where gift card holders attempt to distract a cashier so they can access the point of sale device and issue a return to their card. This is one situation where employee involvement puts a business in an impossible position to catch the fraud. The business is unlikely to notice a return has been processed until they settle out for the night, the fraudster is left with the rest of the day to make purchases on their newly acquired funds.

The best way to combat this and any other return or credit related fraud, is to have strict controls over the ability to refund and credit a customer’s card. All refunds should require manager approval and a refund should never be made to a card other than the one used to make a purchase. Terminals and POS devices should be in areas where customers do not have easy access to them and return and credit functions should be password protected at a minimum.

Return Fraud

Return fraud can be a huge problem for retail merchants, especially retailers who are large enough that employees do not have the ability to remember most of their customers, and ones who stock widely available products.

The most common form of return fraud is when a person returns goods that were purchased cheaper from another store or stolen goods for cash. A merchant, at the very least, pays the retail price for the product which causes any future sale to be unprofitable, and if the goods were stolen, there’s a chance that the police show up looking for the product. It’s also common that the person stole the product from the same store they are trying to return it to.

But, even in cases where goods aren’t stolen, merchants can suffer substantial loses from customers returning used or broken items, old items put in the box of a newer one, or items outside of a reasonable return window. Return fraud is one form of fraud that is frequently aided by employees who relax return policies or in more nefarious cases steal products themselves and have an acquaintance return them for a split of the cash refund.

Thieves are smart enough to target businesses during the busiest times of the year for returns which is typically immediately after the holidays when stores are extremely busy and often overlook or do not have the capacity to properly vet every return they are receiving. The NRF estimated that in 2015 alone, US retailers would lose over $2 billion dollars due to return fraud.

Combating return fraud can be difficult. Clear return and refund policies should be posted and strictly adhered to. Refunds should only be issued in the same form the payment was received, and in the case of electronic cards, should only be returned to the same card as the sale. Merchants should outright refuse refunds they are unable to determine are legitimate, refunds unaccompanied by a receipt, and refunds that contain obviously used or replaced products, unless they cover refunds on those products. Merchant’s can employ proprietary or hidden tagging methods so that they can determine if a returned item actually originated from their store. In any case, if employees are helping defraud the business, it can be nearly impossible to prevent, so controls over who can accept returns and process refunds should be in place.

Also, it is worth noting that someone trying to defraud a business isn’t going to look obviously like a thief, they’re going to look just like a normal customer, and will usually have a believable story as to why they don’t have a receipt with their item. At the end of the day, a business will still lose the same amount of money regardless of whether it’s to someone who looks like a stereotypical cartoon thief or your favorite aunt, which is why policy adherence is so important.

General Good Practices

  • Require a positive AVS match and CVV match on all non-present transactions
  • Ship only to a customer’s billing address unless you feel comfortable shipping to another address, but know you will likely not be able to win a chargeback no matter what other verification you require
  • Restrict access to your terminal or POS system
  • Require owner or manager approval for all refunds and credits
  • Inspect all refunds for condition and verify the product is correct to the packaging
  • Do not issue a credit to any card other than the one used to make a purchase
  • Have and adhere to a refund policy without exception

Call us at (866) 937-5973 or check out our website to learn more about The Merchant Store’s services, POS systems, and processing equipment.

Have a happy holiday!

November 16th, 2016 by MSI Newsletters

25 things your bank doesn’t want you to know about your merchant account

Filed in: Monthly Newsletters |

Your qualified discount rate means nothing:

Don’t be fooled by a 1% lead in offer. This rate is your qualified debit card rate. Most likely less than 30% of your transactions will qualify for this rate. What really matters is what your overall effective rate comes out to which is the total cost of your processing fees divided but the total sum of the transactions you accept per that billing period.

You personal bank is probably the most expensive place to get a merchant account:

They already have your trust and they use it to offer services at a significantly higher price than what you can find in a competitive environment. Banks are notorious for high fees, egregiously aggressive contracts and leases, and most of the time they actually use an independent company to actually handle their client’s credit card processing.

Your processor loves you when you key in your transactions:

Your processor makes more money every time you key in your transaction. Often times an additional 1 to 2 % surcharge is added to the cost of this transaction.

Address verification (AVS) and CVV2 is important:

In addition to providing some security, missing CVV and/or AVS information for non-swiped transactions will cause your transactions to downgrade costing you more money.

Ditto for rewards Card and business Cards:

Good excuse to add 1 1/2% to a transaction that may only cost the processor an additional .20%.

Your processor has a conflict of interest with your chargebacks:

That’s right, your processor can shut your account down if you have too many chargebacks meanwhile they are making $10 to $25 on every chargeback you receive.

Your bank has an even bigger one:

Issuing banks are the party who actually controls the chargeback process and who rules on the outcome. They account for the majority of the fees you pay to accept credit cards while collecting an even larger premium from their credit card holders in the form of an APR on their credit cards.

Processing EMV cards properly is important:

Besides protecting from fraud from duplicated cards, some banks are issuing automatic chargebacks for transactions not using the chip reader.

Your rates are going to go up twice a year after you sign up:

Sadly, each year, officially in October and April, the card brands (MasterCard, Visa, Discover) adjust their rates and there is usually an upward hike on everyone’s cost. While it may only be a few basis points each time, it will add up after a number of years. That’s why it’s always a good idea to do a rate review on your account every couple of years.

A PINpad can save you money:

Especially if you have a high ticket or a large number of customers who prefer to pay using their debit card and PIN number. The average the cost of a transaction could be the difference between 65 cents vs $1.00 for just a $50 transaction. Saving will be even more for higher transactions. PIN debit is also virtually impossible to dispute, so there is some protection from chargebacks for PIN debit transactions.

A PINpad can lose you money:

Since the Durbin debit regulations, PIN debit is often more expensive to accept than signature debit for small transactions, and the debit networks such as Star, Pulse, etc., can now charge a monthly fee. If you do not routinely accept transactions using a PINpad, or have a low ticket size, you may be better off just running debit cards like you would a credit card without having your customer enter their PIN number.

PCI compliance is important:

Not only is becoming PCI compliant important for security sake but most likely your processor is charging you a fee if you are not compliant. This non compliant fee has become a huge source of income for the processing industry.

If you process less than a $1,000 a month, you should probably just use Square:

It’s not hard to beat the Square processing rate (2.75%), and they are all but non-existent on customer service, but because of zero monthly fees, Square is often the best deal for low volume merchants. This may change in the future if Square moves away from their no monthly fee model or increases their rate because they aren’t profitable, but it doesn’t appear to be under any immediate threat of being withdrawn.

Leasing Equipment is not a smart decision:

Normally the machine you leased can be purchased for a 1/4 of the price of most 36 month leases, often even less. There are many companies, including us, that will steeply discount or give you a terminal to use for free.

Leasing is often bad but watch out for Free Equipment Deals as well:

Many times free equipment deals comes with strings attached such as higher fees or a very onerous contract. We’ve seen contracts with $5,000 or more termination fees and 3 – 5 year contract terms tied to free equipment programs. Some contracts even try to only give a 2 week window to terminate the contract or it automatically renews. In the case of anything, if it’s free, be conscious that they may be making up the money somewhere else or they may be aggressively locking you into a processing contract.

Termination Fee is Optional:

Most processors can waive the termination fee any time they want. This becomes less of a possibility when signing up with free equipment programs and complex setups such as POS systems or processing involving multiple independent parties.

At the same time, termination fees aren’t the end of the world:

Despite what many people think, gaining a merchant account customer and setting up an account isn’t cheap and takes a lot of work. It’s tough to see another company, often falsely, lure a customer away often only offering pennies of savings. Companies that charge reasonable termination fees can be the ones with the most honest rates and best customer service. Don’t assume a termination fee in itself is a measurement of the quality of company but watch out for excessively long contracts, expensive termination fees or liquidated damages clauses, or extremely narrow closure windows.

Next Day Funding is an Option:

Most companies can provide next day funding but the default is always for an extra day delay. There is almost always a cutoff time in the afternoon or evening for next day funding to work which can make the benefit negligible for bars, restaurants, and businesses that stay open late.

There is a special way to set up accounts for Large ticket Business to Business and Government transactions:

It’s called Level 3 Processing and it can lower your interchange cost up to 40%.

Small ticket merchants have special rates also:

If your average ticket is below $15, there is special pricing to lower your transaction fee.

Under some circumstances you can now charge your customers a surcharge or convenience fee to cover your credit card costs:

Some states prohibit this but in most states a merchants may charge extra for a credit card purchase.

You don’t have to accept all brands of credit cards:

That’s right, if you don’t want to accept Visa Debit, you don’t have to.

There is also a special set up for Emerging Markets:

If your business qualifies for one of the following business types/sic codes, there are special interchange rates for you. Government (MCC 9399, 9211, 9222), Schools (MCC 8220, 8211, 8299), Insurance Companies (MCC 6300, 5960), Fuel Dealers (MCC 5983), Child Care Services (MCC 8351), and Direct Marketing Subscription Merchants (MCC 5968). MCCs 5960 and 5968, Telecommunication Services (MCC 4814), Real Estate Agents and Managers-Rentals (MCC 6513), Charitable Organizations (MCC 8398), and Cable, Satellite, and Other Pay Television & Radio Services (MCC 4899).

A bank cannot require you to have a merchant account as a condition for a loan or other service:

This is called bank tying and was specifically prohibited by Congress in 1970 yet it remains a frequently used condition when business open business accounts or apply for credit or financing for their business through their bank.

Nobody is really going to save you a ton of money if you have a decent setup:

The merchant account industry has fixed costs across the board, whether you process with a small company like ours or a billion dollar bank. So, unless you are truly getting a bad deal, or you are an extremely large business where the smallest of changes in rates results in a large different in cost over time, nobody is going to be able to save you a ton of money. A .10% rate change in processing fees is only $1 for every thousand dollars processed. Obviously this can add up over time, but haggling over tenths of a percent in processing fees is unlikely to yield worthwhile gains for most businesses.

However, there are huge differences in the quality of support and customer service between companies. This is an industry revolving around your business’s money, and really your business’s ability to thrive and exist, don’t just trust it to anyone without figuring out what kind of a company you’re dealing with or by chasing the lowest offer out there.

Concluding thoughts

Many of these issues can be addressed and prevented by always insisting on cost plus fee structures with your merchant account. While it may make a processing statement more complicated, it’s the most transparent way to process as industry costs are passed transparently to merchant account holders. As always please feel free to contact us if you are interested in processing services from the merchant store or would like additional information about any of the above.

Call us at: (866) 937-5973, visit our website, or stop by our South Austin Showroom.

October 16th, 2016 by MSI Newsletters

Clover vs Square Register

Filed in: Monthly Newsletters |

If you’re in the market for a point of sale (POS) system odds are you have run across both Square’s Register and the Clover POS System. There is a lot of information out there to go through, so we wanted to compile an easy to read comparison of two of the Clover offerings, the Mini, the Mobile, and Square’s Stand. All of these are POS systems are designed to be low cost tables based systems aimed at small businesses.

Hardware Capabilities

As far as what you get out of the box, both Clovers have unique advantages over the Square Stand. Where the Stand is nothing more than an iPad stand with a built in card reader the Clover options are both purpose built POS devices based on tablet computers. The Stand lacks current payment technologies like EMV and NFC (think ApplePay), and most of its accessories cost more than the equivalents from Clover. Another thing I like about the Clover options is that the Mini comes with a built in printer and the mobile a built in bar code scanner, which are usually quite expensive if you have to buy them separately.

Before we get into price please take a look at the table below to see how each system is configured out of the box.

Printer Cash Drawer Kitchen Printer Bar code Scanner EMV/NFC Connectivity
Square Stand Optional Optional Optional Optional Optional Depends on Ipad model
Clover Mini Built in Optional Optional Optional EMV & NFC Ethernet / WiFi
Clover Mobile Optional Optional Optional Built In EMV & NFC WiFi / 4G

App Markets

Both offerings have their own app markets where you can add just about any features you can imagine. Both Clover and Square have worked hard to build an app ecosystem to enhance small businesses and I highly recommend looking at both Square’s App Marketplace and Clovers App Market.

Unfortunately I found you have to register with Square to get much information about the cost of their apps, and of the ones I could find costs on it seems most were variable rate based on different metrics. With Clover on the other hand their App Market is open for anyone to view without registration, and while some of the apps use variable pricing based on usage, many, if not most are either free, or have a flat rate regardless of usage.

I really like the use of App Markets, as it doesn’t lock you in to paying for features you will never use and its give you the ability to change aspects of your Point of Sale without having to buy an entirely new system. This is a huge improvement to what merchants using legacy POS systems are used to.

Purchase Price

Let me preface by stating the Square Stand is $99, however you have to have an iPad to go in it. Whether you already have the iPad or you’re having to buy one, at some point that device cost a minimum of $399 new, so I included as part of the Square Stand unit cost. Depending on the actual iPad being used, it’s possible that the initial cost is more than $498, and using a refurbished iPad may lower the initial cost.

Looking at the table below you can see right out of the gate that Square’s Stand with the cost of the iPad included actually costs slightly more than the Clover Mini, even though it’s missing a printer and the ability to accept current EMV payment types. Alternatively the Clover Mobile is almost $125 cheaper than the Square Stand, including the IPad cost, and includes a bar code scanner which will set you back $119 from Square.

Let’s say you have a retail store front and you need a point of sale, a printer, cash drawer, bar code scanner, and the ability to accept payments based on current EMV technology, the Square Stand and accessories would cost you $1,194. By contrast, the Clover Mini would run you $718, and the Clover Mobile at just $624. This was surprising to me, when I started researching this article as I thought the costs would be exactly the opposite. What’s most surprising is even if you didn’t have to buy an iPad, it’s still cheaper to go with either of the Clover options, we also put together a Clover configuration builder to see what a system costs with only the accessories you need.

Unit Price Printer Cash Drawer Kitchen Printer Bar code Scanner EMV/NFC Total (POS, Printer, Cash Drawer)
Square Stand $498 $299 $229 $299 $119 Starts @ $49 $1075
Clover Mini $490 Included $99 $349 $129 Included $589
Clover Mobile $375 $150 $99 $349 Included Included $624

Monthly Costs

I was thinking this is where Square would have an overwhelming advantage, but it’s not nearly as wide a margin as I thought. Square and its associated accessories do not carry a monthly fee for the basic setup, where either Clovers cost about $40 per month when you have the POS software activated. A note on this, both Clovers can operate without full functionality for no monthly fee. This is actually sufficient for many merchants, but to gain full access to the features and app market, a merchant needs to pay the $40 monthly fee. That being said Clover comes with a ton a benefits and many of the apps in their App Market are free, or have free trials you can use to test out the app. If you’re just looking for a basic register capabilities you don’t have to activate the POS function in Clover, you can just use it as a very advanced cash register. When the POS functionality is turned off, many of the apps in the Clover Market won’t function, but there are still many available apps that will work when not using the full POS mode.

Once you start adding apps to the Square register, the costs really start to add up. For example if you want employee management capabilities and your using Square, your going to pay $5 per month per employee. Clover has some very basic employee management built in, but you can add an employee management app, like Homebase. Homebase has a free subscription level which is more than adequate for most businesses, but if you are in need of some of their premium services they charge a flat monthly price instead of basing it on the number of employees.

A couple other examples: Inventory management, while Clover includes a solid base inventory system you’re going to spend at minimum $10 per month to get similar functionality out of a Square setup. Or if you’re a restaurant, on Square you can add the TouchBistro app for $69 per month, where restaurant and retail functionalities are built into Clover from the start.

When you start adding up software add-ons from both Clover and Square their costs become fairly equal for basic usage, and while Square’s monthly fees come out a little better in some scenarios the same can be said for Clover. When the amount of apps and usage increase substantially, Clover often has a significant advantage in cost.

These monthly costs often come as a surprise to merchants who have not used legacy POS systems, but in our experience the cost of these tablet based POS system is an incredible discount. Some of the monthly or annual licensing fees for POS systems are almost unbelievable when you look at it all on paper. We routinely see single station POS systems costing upwards of $200 per month, and often there are 4 digit fees to make any changes to the system. Tables based POS systems remove this blatant gouging and complicated licensing almost entirely.

Merchant Account Costs

Most people know Square offers a two tier pricing structure without any monthly or annual fees on their merchant accounts. We have already written extensively about when using a full service merchant account with monthly and annual fees become more cost effective than Square. So in this section I’m just going to give you a quick summary. If you would like to read the previous article you can find it here.

If you’re processing less than $2,000 per month in card sales, then a Square is probably the cheapest option for you. Once you consistently exceed $2,000 per month in total card sales, a full service merchant account starts to become the lower cost option. In any case with Square, you need to deal with the absence of quality customer support. Additionally, because Square’s pricing is setup so they actually lose money on small ticket transactions, we do not anticipate Square or their investors to stomach this pricing model indefinitely. It wouldn’t be the least bit surprising to see Square add a transaction fee or increase their processing rate to compensate for the rate they are losing on small transactions. Time will tell how they finally address it though.

We also have a Clover builder where you can build and price a Clover system with additional stations or peripherals. We’re currently offering a discount which gives a free Clover Mini or Mobile to new merchant account customers. Call us at: (888) 528-0058, visit our website, or if you’re in Austin, TX, stop by our showroom and check out a Clover in person.

No matter how you are processing card payments today, if you’re wondering if it would be more cost effective to process card payments a different way we would be happy to help. You can contact one of our specialists at (888) 528-0058, or by email at and we will build you a custom report specific to your business comparing your current setup to alternatives and give you a recommendation.

September 16th, 2016 by MSI Newsletters

Wireless EMV – Cellular Devices

Filed in: Monthly Newsletters |

For many small businesses mobility is a must, and over the years more and more options have been coming out to meet the needs of these businesses. From smartphones, to credit card terminals, to fully mobile point of sale systems, there is an option out there to fit any type of mobile business, but many seem to be lacking in the newest payment technologies like Smart Cards (EMV) and Apple/Samsung Pay (NFC). For those merchants who would benefit from mobile processing and would like to take the EMV and NFC, we have put together a short list of devices that we think its worth looking into.

The Quick and Simple – Smartphones and Tablets

Clover Go

This small card reader connects through your phone or tablet’s head phone jack and can accept swiped or EMV transaction through the Clover Go app. Clover will soon be releasing a model that will connect wirelessly to you Smart Device so a phone and the Clover Go no longer need to be physically connected.

While the Clover Go app is quick and easy to use it does not compromise security or convenience. This app comes with TransArmor, the industry’s leading data protection solution, which secures each transaction all the way through the transaction process. For merchants already using a Clover system the Go can be integrated into the existing system to make it a mobile extension of the business.

More Robust / Higher Frequency – Desktop Wireless Terminal

Ingenico iWL255

For businesses that need a device dedicated to payments most turn to wireless terminals. Good wireless terminals are absolute work horses, designed to take a high volume of credit card transactions in rapid succession. On the down side wireless devices tend to costs more than standard terminals and do carry a monthly wireless fee however if your business needs a fast and robust processing solution these are many times the best option.

The Ingenico iWL 255 is one example of a great wireless terminal option that supports both EMV and NFC transactions as well as Pin Debit. Its compact and light weight design features a bright full color display that provides outstanding readability both inside and out.  Between its extended life battery and 3G cellular communication the IWL 255 will last all day in most active retail environments.

If you are looking for a wireless terminal don’t skip over the next option below.

Full Point of Sale

Clover Mobile

This device can be as minimal as a wireless terminal, or as tricked out as a full blown point of sale system. While it costs about the same as many wireless terminal options it’s as flexible as you would ever need it to be. In terminal mode you have access to a small number of apps through the Clover Market which allow you to customize the device to your needs. If you want to take full advantage of Clover Mobile you can upgrade it to Point of Sale mode, which opens up inventory controls, and the full Clover app market.

Like the Clover Go, the Mobile’s transactions are secured through TransArmor, and can integrate with existing Clover systems. It comes with EMV, NFC and PIN Debit capabilities and communicates over 3G and Wifi. It features a large full color touchscreen, bar code reader, camera, and can be connected other optional hardware. For example you can add the Clover Mobile Printer which can print wirelessly and operates on an all-day battery.

The App Market give you access to add additional inventory controls, employee management, Gift Cards, customer communication and much more. Unlike traditional point of sale systems where you are stuck with the features built in by the vendor, and you pay for every feature regardless of if you use it, the App Market allows you to customize the system to your business and use the features you want. There are many free and paid apps in the market, and first and third party vendors are adding more every day.

Final thoughts

Above are just a few wireless options that are available to businesses today. All are reasonably affordable, fast, and secure, offering a unique user experience. At The Merchant Store we offer all of these devices to any business owner at wholesale prices.

If you have any questions about the options here, or even general industry questions please contact us at your earliest convenience at (866) 937-5973. For the first 5 businesses who setup a merchant account with us and mention this article we will also pay for the first 3 months of monthly fees.

If you don’t have a clover station, check out the Clover POS system today. Clover is a well developed POS system for a fraction of the cost of many legacy POS systems.

We offer a free Clover mini or mobile, or up to $500 off the cost of a new Clover system for new merchant account customers.

Learn About or Get your Clover today.

June 16th, 2016 by MSI Newsletters

Capital Advances

Filed in: Monthly Newsletters |

Are you looking for money to expand your business, add inventory, purchase new equipment, or do renovations? A capital advance could be a helpful tool to expand your business and are much easier to get than more traditional forms of small business funding. There are two sides to every coin however and it’s important to know that this option does tend to have a higher overall cost. If your business is looking for funding it would be a good idea to review this options and see if its good fit for your business.

How it works:

Unlike a loan where you are borrowing money that then needs to be paid back in regular amounts and on regular intervals, in a capital advance your selling your business’s future receivables for cash today. Once your account has been funded we will take a small portion of each batch you process until the advanced funding is paid back. That means no fixed monthly costs, your automatic payments fluctuate with your credit card processing volume.

Application Process:

capital advances are based on your monthly credit card volume and ranging from $5,000 to $1 million. Most capital advance options out there are designed to have a simple application process with no application fee and no obligation accept the funds once approved.

While I can’t speak for other companies offering capital advances, at The Merchant Store once you complete our one page application you will be contacted within 24 hours by a funding specialist who will discuss the funding solutions with you. We can have funds deposited in your bank account in as little as 5 business days from receiving the application in most cases. See below for our approval criteria.


Approval Criteria:

  1. Monthly credit card volume: $5,000 or greater
  2. Business age: Greater than 12 months
  3. Tax liens: $20,000 or less
  4. Bankruptcy: Older than 12 months
  5. Primary residence: Must not be in foreclosure
  6. Business rent: No more than 30 days delinquent
  7. Bank account: No frequent overdrafts
  8. Business location: Not home based
  9. Average ticket: $600 or less
  10. Capital advances: No previous capital advances in past 60 days.

If you interested in more information about our capital advance options please contact us at (888) 528-0058 and we will help you get started.

capital advances: No previous capital advances in past 60 days.

Gateways aren’t just for e-commerce

The primary function of most gateways in the past was to handle a credit card transaction between a business shopping cart and their processor. These days however many gateways offer advanced features that can meet the needs many business types. Below are a few key features that apply to many different business types.

QuickBooks Integration

If you are using QuickBooks to process your credit card transaction you are most likely using Intuits credit card processing. Many gateways, including our own, now integrate directly with QuickBooks which give your many more options when it comes to credit card processing. These integrations can also include the ability to access other features in the gateway right from Quickbooks. See Customer Vault, and Recurring Billing below. Also if you are processing with Intuit and have not reviewed what you’re paying them to process your transactions recently I suggest you start seeing what other options are available to you.

Customer Vault

This feature allows you to store you customer’s credit card data in the gateways secured environment so you can access it for rebilling without having to request the credit card details for each returning customer. This ability to keep a card on file lowers risk of error, and makes transactions much easier for both the business and their consumers.

Recurring Billing

For businesses that have customers who are on service plans, memberships, or any other type of regular payment recurring billing allows you to automate the payment process. You can set recurring amounts per induvial customer or create plans and assign your customer to the billing plan that your agreement. This can be a great time saver for many businesses.

Mobile Processing

Processing transaction on a Smartphone is an easy, and low cost solution for mobile merchants. Our gateway allows you to add multiple smartphones, tablets, and computer to their system so you can run transaction anywhere from your device. Whether you just need access to hand key a transaction every now and again, or need to be able to swipe a credit card at a high place trade show, this is a flexible option without the cost of the traditional wireless terminal.


Our gateway gives you the ability to invoice your customers and provides a direct link to make payment. Just a few clicks and your customer has an invoice in their inbox, and they are just a few more clicks from finalizing payment. While you don’t have to customer the look of the invoice or the payment page, you have the ability brand everything so it fits your business.

These features are just a small handful of what the MSI Gateway offers, and can be mixed and matched together to fit any business needs at a very affordable price. Our gateway service, including a virtual terminal and recurring billing starts at $8.00 per month and $0.08 per transaction. If you are interested in hearing more about the gateway features here or any additional features please contact one of our representatives at (888) 528-0058 or visit our website.

May 16th, 2016 by MSI Newsletters

Make your terminal or POS last longer

Filed in: Monthly Newsletters |

Make your terminal or POS last longer

Credit card terminals and POS systems are typically designed with reliable components that should last for many years. However, there are ways to decrease the lifespan of credit card processing equipment and many merchant may not know they’re already doing them.

Common ways to reduce the lifespan of processing equipment

  • Heat
  • Liquids
  • Physical Damage
  • Power Surges


The most common way that the lifespan of processing equipment is reduced is having it in an area where the equipment overheats. This is especially true for systems that experience heavy usage like a POS system. The best way to keep equipment cool is to make sure there is adequate ventilation around it. These machines are typically designed to produce as little heat as possible but when they are placed in enclosed spaces or areas with poor airflow, heat can accumulate around the equipment. Unless it’s extreme, this doesn’t result in immediate failure, but over time will degrade the electronics and cause the equipment to fail before it otherwise would have. For POS system or equipment with fans, make sure the discharge is away from the equipment.


It goes without saying that liquid and electronics don’t mix well, but we commonly hear about drinks being spilled on terminals, especially in restaurants and counter service businesses. POS systems and credit card terminals are often in a location that makes then highly likely to be spilled on. Keep sodas, drinks, and other liquids away from processing equipment or put the equipment in a place where it is less likely someone would store a drink next to it.

Physical Damage

Credit card terminals, especially the portable ones, are built to be durable. But they’re still not designed to be dropped or heavily impacted. Even if there is no visible damage to the equipment, there are security features that may make the equipment unusable. Using a fixed stand or making sure cables are secured to the wall or counter will make sure it doesn’t get knocked onto the floor. Wireless terminals are more difficult because they’re constantly moved around, so diligence, or storing them in a padded bag when being transported, is the best way to prevent them from being damaged.

Power Surges

It is an absolute must to use a power strip that protects a POS system or credit card terminal from power surges. This is even more important if you live in an area that receives frequent lightning. Even if the power isn’t completely knocked out, power surges can wipe the programming, damage, or completely destroy processing equipment. This is by far the most common way we see terminals get damaged. A GFCI outlet does not protect equipment from surges, you must use a UPS (uninterpretable power supply) or power strip that is designed to protect from power fluctuation. The best ones also have ports for Ethernet and dial phone lines that protect from surges through these connections in addition to the power. Not all power strips actually protect from surges so unless the strip specifically states that it does, assume that it wont.

These are the 4 most common ways we see equipment get broken or the life reduced below what should be reasonably expected. Processing equipment isn’t going to last forever, but because of the slow nature of changes in processing technology, processing equipment can last a long time if treated properly.

April 16th, 2016 by MSI Newsletters

Smart Phone Processing Outside a Square

Filed in: Monthly Newsletters |

In the past there was only one option when it came to truly mobile processing, the cellular credit card terminal. While these devices work great and offer fast, stable, transactions, they are expensive and come with additional monthly fees from a wireless provider. As technology has progressed, so have the wireless processing options, like the smartphone or tablet. Setting up a smartphone or tablet to process your credit card transactions is a great alternative to traditional wireless devices, by offering a lower cost of entry and flexible options.

For many merchants smartphones and tablets offer a conventional way to accept credit card payments, however many of the popular options, like Square, come with high per transaction costs that can really add up. If  your business is processing less than $2,000 per month in credit card sales its generally more cost effective to use a company like Square because of their lack of monthly and annual fees. On the other hand if your processing volume exceeds $2,000 per month, paying lower transaction fees through a full service merchant account will generally more than offset any added monthly fees, not to mention the availability of dedicated support with a full service merchant account. Take for example a food truck processing $10,000 per month with a Square account. At a flat 2.75% per swipe fee they are going to be paying $275 per month in credit card fees. With a full service merchant account costing them $12 per month and a lower effective swipe rate of 2.00% they would pay $212 per month, which is more than a 20% savings.

Our team has a lot of experience with the many options out there and would be happy to help you get started in the right direction. We do offer several different variations of this service supporting both Android and Apple products through our MSMobile program. MSMobile customers are charged a small monthly fee, starting at $12 per month, and have a choice of rate structures including a flat rate option, which is lower than Squares 2.75%. From how you charge your customers to how your fees are structured MSMobile enables you the power to choose whats right for your business, which is why it has become one of our most popular wireless account options.

Reach out to one of our specialists or call us at (888) 528-0058 today and let us show you how we can put together a custom quote for your business.

Mobile Wallets (Apple and Samsung Pay)

Does your business accept mobile wallet payments? A couple years ago mobile wallets were mostly unheard of and merchant acceptance was low outside of the eCommerce environment. Today with the rise of Apple Pay and Sumsung Pay, mobile wallets have started to take off and are projected to increase in coming years as more and more businesses add the ability to accept these payments. In an article last year,, said that in 2014 0.5% of NFC equipped smartphones were used at least once a month, and they were expecting that number to be closer to 5.0% by the end of 2015. This does make up a small portion of today payment volume, however over the next few years we expect to see a substantial increase in processing volume.

How do mobile devices work with mobile wallets?

Both Apple Pay and Sumsung Pay use Near Field Communication (NFC) to communicate with a business’s Point of Sale using tokenization to secure the card data. Basically when you register your credit card with your Apple or Samsung device the card issuer registers your card number to your mobile device. This means that neither the mobile device or its manufacturer needs to keep your card number on file. When you make a purchase on an NFC enabled point of sale the mobile device sends a one time use token, instead of a card number, that is recognized by the card issuer and linked back to your credit card.

Some devices equipped with Samsung Pay magnetic secure transmission (MST) which can work on almost any existing point of sale system. MST basically broadcasts your credit card data to the point of sale device just as the device would read the data from the traditional magnetic swipe on the credit card. This feature is clearly less secure than NFC, however MST only works within 3 inches of your mobile device and the transmission only lasts a second or two. Meaning if someone wanted to steal your card data, they would have to be awkwardly close to you for the moment that your mobile device sent the MST signal.

How do I start accepting payments from mobile wallets?

Start by speaking to your processor first. You just need an NFC enabled point of sale and the correct software, however you will want to make sure the hardware you purchase is supported by your processor. Many credit card terminals like Verifone’s Vx520 have an optional NFC reader, or you may even be able to add an accessory to your existing device to enable NFC payments. Once you have the required hardware your credit card processor can help you install the required software in your terminal.