Getting the Most From Your Merchant Account, p.2


Each of these two fees can add from $10 to $20 or more each month to the ISO’s bill. But surprise fees aren’t the only issue. The proffered processing rates may be lower than what you’re paying now—but maybe not low enough. “The deal you have right now may not be all that good,” warns Lynch. This is especially so, says Lynch, if you have maintained the same contract for more than three years. Many retailers with older contracts are paying up to 6% or 7% in merchant services charges, including interchange rate markups and per-item fees. “An ISO may promise to cut that down to 5%, but the fact is that no retailer should be paying more than 2% to 3% in total processing fees.” So how can you separate the wheat from the chafe? There’s no doubt that the best way to avoid problems is to check out a prospective ISO with current customers. “If you get a referral from somebody else, that is a good place to start,” says Rianda. “Some of the smaller ISOs that serve specific niches seem to be more merchant-friendly.”


Ask for names of a few current customers. “Any ISO worth its salt will have a referral setup,” says Bill Hearon, president of Effective Payment Management, a consulting firm in West Palm Beach, Florida. “Find out if current customers are able to get through to the ISO during regular business hours. Are they able to speak with a live person rather than just leaving messages on voice mail? And how about after-hours? If a transaction won’t go through at 8 p.m. for example, is there someone available to make things right?” When you’re faced with a transaction that won’t process, time is of the essence. “I have heard many complaints from merchants who stay on hold for 30 to 45 minutes to reach someone in their ISO’s customer service,” says Rianda. A big reason for this problem is that many smaller ISOs are really resellers for larger ones that handle transactions with merchants. And these larger ISOs are becoming still larger, says Rianda, as price competition leads to mergers. “Big ISOs need to run as lean, mean machines and as a result may not be staffed to offer the best customer service.”

Also ask about the ISO’s chargeback policies. “Sometimes an ISO will perceive a chargeback risk to be higher than it should be,” says Rianda. “The ISO will seize the merchant’s funds and place them in a reserve account to be held until the perceived risk is gone.” ISOs differ in how conservative they are in this area, so it is important to research the experiences of current customers. And how about online reporting, which can be a real time-saver for many merchants? “Some ISOs provide daily reports online,” says Rianda. “Others don’t have any online reporting at all, so you end up waiting every month for a paper report.” Given the integral role of the ISO in the credit card machinery, retailers must take care to select the right one. “Processors take care of timely processing of transactions and settlement of balances every evening,” says Hearon. “And they get the retailer’s money deposited to the penny into the right account in a timely way.”