Frequently asked questions.
Merchant Accounts and Credit Card Processing.
No, this practice is known as "credit card laundering" or "factoring." It is against the Visa® and MasterCard® agreement. Using someone else's merchant account to process your credit card transactions can lead to heavy fines and perhaps more. In addition, you'll also put that merchant's credit card processing account in jeopardy.
A merchant account is an account at a financial institution that allows you to accept credit cards. You may find that you can acquire a merchant account directly from your local bank or you may decide to use any of a number of Merchant Account Providers that can be found using your favorite search engine.
Face-to-face transactions where the credit card is swiped is considered less risky by banks. Since this is the case, rates are quite a bit lower as the instances of fraud and chargebacks are a lot less.
The turnaround time can vary from company to company, however it can take as little as 24 hours to two weeks. Very high volume and International merchant accounts seem to take the longest. Companies that allow you to fax applications can usually have you up and running in a few days. One other factor may be the number of applications the bank is reviewing for approval.
This processing fee is collected by your transaction and discount rate fees from your credit card sales each month. So, for instance, say your merchant account company charges $25 as a monthly minimum, if the transaction and discount rate fees collected by the processing company add up and equal or go over $25 that month, no monthly minimum will be charged. However, if the fees for that month do not meet the $25 monthly minimum, you will then be charged the difference. You can avoid this fee in many cases by just processing a few thousand dollars per month.
Discount rates are basically a percentage that is taken from the charge that is being processed. For example, if your discount rate is 2.35% and you have an order for $100, the discount rate being deducted would be $2.35.
Personal and business credit are factors that are used to qualify a business or individual for a merchant account. Every merchant account application will include a credit check of the business and the person signing for the merchant account. Perfect credit is not a requirement for opening a merchant account, but a better credit rating can help speed up the application process. The only time that credit becomes an issue when opening a merchant account, is if a merchant has an open bankruptcy, or has been terminated from processing in the past.
A chargeback is where a customer is disputing a charge listed on their credit card statement. Typically as a merchant you will be charged a chargeback fee of around $15 to $35 per incident. It is important that you keep chargebacks to a minimum, most merchant account contracts do not allow a chargeback rate over 1% of your total transactions for the month.
Your card sales are deposited to your checking account after each daily batch settles. Deposits usually occur 1-2 days after the sale took place.