7 Red Flags To Look For When Setting Up A Merchant Account
1. Cancelation Fees or Early Termination Fees.
Transaction fees do change from time to time so a cancelation fee can be a merchant service provider’s way of ensuring a business doesn’t look elsewhere for a better rate. A good merchant service provider will not have a cancelation fee because they’re conﬁdent their rates will remain competitive throughout the three year span of a typical merchant contract.
2. Monthly minimums.
A monthly minimum is a minimum amount of transaction fees a business has to accrue or else they’re charged the difference. A typical monthly minimum is $25. In a businesses opening months, this could easily turn a $7.95 per month statement fee into a $33 statement fee.
3. Only getting one rate quote.
Depending on what type of card a business takes, there might be a surcharge for accepting it. For example, corporate cards, international cards, and rewards type cards usually will fall into a “mid qualiﬁed rate” or “non qualiﬁed rate” and typically will not be the same rate as a debit or regular credit card. If a business plans on taking mostly business to business transactions or a lot of rewards credit cards, make sure to ask what the rates for those as well.
4. Leasing equipment.
Many merchant service providers may offer a free credit card machine upfront, but charge a monthly lease fee. Most credit card terminals cost less than $300. It’s much better to purchase a card terminal than lease one in the long run. Furthermore, if business decides to cancel it’s account the machine has to be returned and they’ll have to start over.
5. Poor Customer Service.
Customer Service may be one of the most important considerations in deciding a merchant account provider. Having to go through phone prompts or extraordinarily long hold times while trying to run a business can be a loss of time and money. Always check reviews of customers who have processed through that merchant before signing anything.
6. Poor or No Rating with The Better Business Bureau.
A reputable company is imperative when choosing a merchant service provider. A well established reputation in the industry should be a good benchmark in the decision process. There’s a lot of merchant service providers who may offer a low rate but have a sub par reputation and it’s advised to shy away from those types of businesses.
7. Over The Phone Quotes.
Whenever you set up a merchant account there’s an application involved. Make sure the rates that were quoted over the phone or via email are clearly stated on the application you sign. What’s discussed over the phone might not be everything that’s covered in the application. It’s always a good idea to read the ﬁne print on an application before signing anything. If something doesn’t look right, it probably isn’t.
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