More Junk Fees

They just keep coming.  A new junk fee I recently came across.  I am often asked what is your rate? It’s not about one rate, one needs to look at the sum of the total. Here is another example about another “junk fee”. Monthly Funding Advantage is a made up fee. Also I am seeing a new junk fee called “EMV non-enabled Fee” at a rate of 3 basis points. This fee will hit restaurants that does not have a POS to accept Chip Cards.

Give us a call to find out how we can help you eliminate junk fees. 727-916-7294

What Makes A Business / Merchant “HIGH RISK”?

High risk has to do more with the charge back exposure, since the acquiring / sponsoring bank is responsible for all charge backs if a business were to cease business and close for any reason.  A better way to characterize a business as high risk is harder to place

Why then is a business “harder to place” for taking credit cards?  This is because an acquiring / sponsoring bank will not even consider or approve a business based on various details that are not in line with their underwriting guidelines.  Most of the time it about the financial expose and loss. As an underwriter they look at worst case scenarios in regards to financial expose and loss.  For example, if a business had their processing account stop abruptly, this will have a serious consequence to their cash flow, which might affect delivery of product or service on payments taken previously.  This in turn causes customers to dispute credit card transactions when the product or service is delayed and everything for the business spiral out of control. 

Let’s examine travel agents.  There are several factors that make this type of business “high risk or hard to place”.  The vast majority of travel agents are good people who run legitimate sales through their business, but the problem lies with what is outside of their control.  They can do an excellence job booking a vacation well below market price, but a last minute deals from hotel or an airlines that significantly drop their rates the week before the vacation starts due to a surplus of rooms / seats.  In this example the customer books this last minute deal and goes to the issuing bank and disputes the original credit card charge and will likely win the dispute.  Also consider the travel agent has no control over how their vendor operates and if the customer has a bad experience for any number of reasons they are likely to get buyer’s remorse and dispute the charges. 

Another example is electronic cigarette most acquiring / sponsoring bank will reject this type of business type on principle alone citing it is too easy for a minor to purchase the product online.  It’s the potential of taking part in facilitating the sale of nicotine products to minors that the acquiring / sponsoring bank is avoiding due to nothing in regards to financial expose and loss.

Banks having been doing this a lot longer than you have been in business and have enough experience and history to know that even a good business can go bad.  They look at the long term, “how much do we stand to lose if this company closes its doors tomorrow?” Acquiring / sponsoring bank are typically on the hook for charge backs for six months after the delivery of a product or service. We hope this might help to give you a better understanding into this subject.

If your business is "high risk" or not, we can help.  Contact us at 888-506-9225 or info@tampabaymerchantservices.com

Is There Any Benefit Obtaining Your Merchant Processing Account Thru an Association?

The short answer is not always.  It dependents on how much the Acquire charges or not charges.  What is an Acquirer?  Read our earlier post on this subject. at the following link.  This is not to say other benefits from the “Association” are not good, I am only addressing the credit card processing.  I have talked to several businesses that belong to the “Association” and one of the many so called benefits is the lower cost of processing.  Many of these same merchants are very closed minded about considering another alternative.  The few I did get to see had good rates, but not as low as we offer.  Do yourself a favor, let us look at your processing statement and we will analysis it to let you know just how good of a deal you are receiving from your “Association”.  I am sure you will be glad you did.

If you have any question about this, please feel free to contact us at  info@tampabaymerchantservices.com or call 727-916-7294

Risk & A Merchant Account

What risk?  A customer gives me a credit card, I get an authorization, a day or two later I receive funds, so what is the problem or risk?

An authorization is letting you know that funds are available on the card at that time in point. An authorization does not confirm the cardholder’s card or limit the cardholder from disputing at a future date. If you received more than one decline seek another form of payment. A decline authorization is the issuing banking letting you know there is a problem.

There more to it than this.  A merchant account is like a line of credit with the processing company and unsecured lender.  There is a chance that a card holder can dispute a transaction up to six months from service rendered or delivery date.  If the merchant does not have funds in the bank account, then the provider will be the one to take the loss.  Also consider in some situations, a merchant collects payments in advance of providing the product or service as well as providing some sort of quality assurance, i.e. will be delivered, can be returned, satisfaction guarantee, therefore the risk is ultimately borne by the provider.  This is like a line of credit.   Keep in mind margins are so low for a provider, risk is screened and monitored very closely

Risk Variables & Key Areas

Company longevity & financial strength

Industry and how cards are processed

Billing method and accepting payments in advance

Why is it important for you to understand risk?

Since there are many companies in the merchant provider industry will manage the risk on the back end or after the account is approved.  Then the business might have an unpleasant surprise of having funds held until the merchant service provider is satisfied with the business meeting certain requirements.  In some cases the funds might be held in reserve for up to 6 months.  If you are unhappy, too bad, they have you under contact.  It is important to have this vetting beforehand.

If a merchant provider does not properly assess risk during underwriting and down the road a risk manager flags the merchant, they may withhold funds, require a reserve (where they hold a certain amount of money in reserve to offset the risk) or terminate the processing relationship. So be cautious when selecting a partner. If you are unhappy, too bad, they have you under contact.  It is important to have this vetting beforehand.

If you have any question about this, please feel free to contact us at  info@tampabaymerchantservices.com or call 727-916-7294