Merchant Account Limits and Merchant Service Providers

For most merchants, using their merchant account to process their daily business to its capacity is something that they won’t have to worry about ever, but if so maybe a couple times a year. When banks issue merchants credit card processing accounts, they place limits on processing capabilities based on criteria such as their business longevity, personal credentials, business plan and the size of the business. Even businesses that anticipate fast growth and a high volume of credit card sales almost immediately or within a short period of time such as ecommerce merchants and telephone order merchants have limited processing in the beginning. For these types of business owners limited processing capability can mean limited growth; this can even limit the planned growth of that business based on a maximum dollar amount of revenue generated. Since the ecommerce boom at its inception, merchants have struggled with sourcing stable, uninterrupted credit card processing for a reasonable rate. Many times banks and processors will assess high rates to young merchants or ones that wish to grow fast. The rates that merchants pay are not the only financial constraints that they may face; many banks will hold a portion of their revenues for impending chargeback’s, even if that merchant’s chargeback ratio may be low to begin with. For ecommerce and telephone order merchants whose primary business is done based on card not present transactions, these fees come with the territory and are accepted. For these reasons, many of these and other merchants negotiating rates and fees with banks and processors can become more complicated when the initial rate is established. A common negotiating tool that businesses use when negotiating their discount rate with a processor or merchant service provider is the promise of volume in terms of both total dollars processed and the amount of transactions processed.

Economically, high volumes are good for both parties as banks will make more based on dollars processed and merchants can profit more with lower rates; however, the empty promise of high volumes is not uncommon and is swiftly followed up by rate increases and even slow pay times. For many merchants that resort to this tactic as a savvy negotiation, frustration and dismay often follows. These processing situations are followed by banks tightening up their criteria for high volume accounts for unproven businesses. This seemingly vicious cycle of merchant and bank relations is being sorted through at the beginning of the relationship today by merchant service providers, as prequalifying and rate negotiations are often finished before the merchant is set up with their account. This added step makes for a stronger relationship for all parties due to the fact that rate scales are established and banks are not bogged down with these issues after the merchant has been established. Merchant service providers can act as a buffer for a bank which banks appreciate, but for merchants, the relationship is simplified and an easier one to foster due to a single point of contact with established constraints. As with any relationship, trust is essential and in business, especially dealing with financial issues, trust needs to be the basis of that relationship. Whether approaching a processor, merchant service provider or a bank directly, every merchant needs to feel comfortable with the person they are doing business with; in every case well defined parameters need to be established at the outset.

About Stradafee:

Stradafee Limited is a leading international merchant service provider located in New York. Stradafee specializes in placing high volume global eCommerce companies. Internet merchant accounts makes it possible for online stores to accept credit cards as a form of payment for goods sold. For information on credit card processing for card present and card-not-present transactions please visit our corporate website at www.stradafee.com.

About the author:

Sager G. Loganathan is a freelance Search Engine Optimization writer specializing in the banking and finance industry. Sager Loganathan, a United States Marine Corp Veteran, has a Bachelor of Arts degree in Communications from the State University of New York at Buffalo.