Your partner in the credit card business
Education
As a business owner, you know that honesty and integrity are valued highly by your customers, and at MerchantGuy™ we know that you expect no less from us. There are many tactics that other merchant account providers may use to increase their revenue at the expense of the merchant account client. We have set this page up in an effort to educate business owners and help them save thousands of dollars with little effort. Here is a list of the methods that we see other merchant companies use on their clients.
Rock bottom rates
This is the most common that we see in the market place today. Business owners are looking for the lowest rate to get charged, so they get to keep the most money from every transaction.
Example: If a business calls up and ask a merchant services provider a single question, "What are your rates? We are shopping for the lowest rates." This is the easiest catch out there. This is where a merchant provider can just make up a rate to give to the business owner.
Example: "We can sign you up today at 1.12 %." They might even try to make it more believable with a rate like 1.20% which is far under cutting any rate even possible.
Business owners don't have the time do the homework to see how pricing is set by the major credit card companies. This client will more than likely be signed up on a two tier or three tier system with the top rate being the below cost rate of 1.12% from the example above. When this happens the account will be setup and every time a transaction is accepted. It will look at the top rate. The system then compares the top rate to cost which you can find on any major credit cards web site such as Visa® or MasterCard® and searching their site for interchange rates.
For example lets say cost is 1.65% for swiped transactions. When the top rate is below cost it downgrades the transaction to a rate that is above cost. The next rate down may be anything from 2.99% to 3.89%. In this method the only rate that may show up on your statement it the top rate but every transaction will be a downgrade, thus more money for the merchant provider and more money for the credit card companies. Most credit card companies and merchant service providers allow 85% or more of the transactions to be downgraded. This hurts the business owner and puts more money in the banks hands.
Downgrades do happen, and this is not always a bad thing. Merchantguy.com strives to keep less then 20% of your businesses transactions from getting downgraded. This is very rare in the industry. Merchantguy.com will discuss this with you in detail and help you avoid this common problem. Put more money in your pocket rather than give it to the bank.
The Contract - hidden fees and loop holes you never see coming
Many other merchant providers still require business owners to sign a contract. Why? This is the best place to load you up with paperwork and hold you to a number of expensive problems that can bite you. Of course, it depends on the contract,And we are going to show you some of the common problems in contracts and how they hurt the business owner.
Monthly Minimum
If you are a new or small business owner, this is usually where you will get hit. Since you are a new or small business owner, the merchant provider will not be able to make very much money on your account, so they will want to set a minimum on your account. You will often see minimums ranging from $10 - $200. Many people think that you must swipe the minimum every month. This is not true. What it means is that every month the minimum will be removed from your bank account;with or without business transactions.
Example: Joe has a small shop and sells widgets. Let say Joe sells $300 worth of widgets in one month and has a $50 minimum on his account. Joe thinks that he has no problems because he has done over $50 in business and so he will be fine. This is wrong. At the end of the month Joe thinks he will have $300 minus fees in his bank account. What Joe will really have is $300 minus $50 minus fees equals little or no profit.
So watch for any monthly minimums and make sure that they are clearly detailed and understood.
2-6 Year Contract / Cancellation Fees
This is another way that a merchant provider can use to loop in a business. Signing a merchant provider contract with a specified term length can mean that you have to use this company for 2-6 years for all of your credit card services. If you are not happy with the rates or support and decide to change providers, you will have to pay a fine or cancellation fee as specified in the contract. We have seen these fees range from $150 - $3000. As soon has you change providers, your bank account will be hit with the fine automatically and you may wonder where your hard earned money went. Anyone who starts a business needs a good partnership with their merchant service provider, not a forced legal tie. MerchantGuy™ almost never requires a contract except for in special cases. We don't think it is fair, and we invite you to give us the chance to prove that we should be your merchant services partner.
Sub-Contract Merchant Company's
This is not as common, but you should be aware of this situation. Some merchant companies are not registered as an Independent Sales Organization(ISO) or Merchant Service Provider (MSP), and they may you that they do not need to be registered. This is false.
"We are bigger than a bank" or "We are a registered mint" both of which are always false.
If they were a bank, you could open a checking account with them. If they were a mint, they could print money and would have no use for merchant services. Companies like these do try to come in and save a business owner money over their current provider just to get them on as a client, but they have no reason to take care of the account or reason not to raise the rates three months after they sign you up.
One way to spot this type of business is to ask them who they are registered with and how this can be verified. One way to spot this is to see them using a merchant application from a local bank that you could walk into. They are taking the rate they get from the bank and marking it up before they give it to you. You would be better off walking down to the bank and getting an account setup. Better yet, give MerchantGuy, a registered ISO, a chance to be your merchant account provider and make the banks fight for your business.
Buying vs. Leasing Terminals:
This has been around since the beginning. There are many pros and cons to each. In most cases you should buy your terminal or signup for a free terminal program. Many years ago credit card machines where very expensive. Now you can pick up a feature rich terminal for $300. The trade-off with a lease is the $25- $60 a month that you pay for 2 to 4 years. You can do the math. $25 a month for 4 years is $1200 for a terminal. When you could buy one for $300.
As technology has changed we now have wireless card readers available that work great for mobile plumbers, locksmiths, independent cab drivers and so on. The new wireless scanners are still in the $1000 to $1500 price range. So a lease for a new business owner is often better than trying to come up with the money up front.
We have a large selection of equipment available. We understand that getting a business off the ground can be expensive, and we offer a number of different ways to get the terminal that best meets your needs. Feel free to contact us with any questions that you might have.