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Old 07-30-2009, 11:12 AM
Michael Michael is offline
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Default How to Apply for a Merchant Account Directly from Banks to process credit cards
Not all banks provide merchant processing services. In fact, I believe most don't. The big boys like boa and Wells probably have a merchant card services division. If you know your bank does in fact have a merchant card processing service, you should get the application from them directly.

You can also find a merchant processor - there are hundreds if not thousands on the Internet - compare rates, percentages, look at some of the ratings of merchant providers here in PaymentProcessing.CC, etc. - send in your application with your business bank account on it, the merchant processor approves it and gets you setup to accept credit cards and you're done. May take 3-5 business days to get the whole process done but it's not terribly difficult.

Be very careful that you understand all the various fees and monthly expenses involved in accepting credit cards. I was pretty surprised at how nickel-and-dimed I felt. If you have the volume to justify the fees though you probably won't notice those expenses as much.

If you are looking to obtain a merchant account for your own use, keep in mind that ANY merchant account that you sign up - whether it is from an ISO/MSP or a bank - IS a bank-sponsored merchant account.

In fact, most smaller banks simply act as agents representing an ISO/MSP or one of the few larger banks that have direct acquiring programs.

However, regardless of the channel by which you sign up, at the end of the day ANY merchant account you have is going to be sponsored by a bank.

In addition, 100% of ALL funds transfers on ANY merchant account are handled on a direct bank-to-bank basis. That is the nature of the way the Visa & MasterCard settlement & clearing systems work.

Thus, there is no inherent advantage in signing up with a bank for a merchant account vs. an ISO/MSP in terms of security, funds safety or other related issues.

If you are a retail merchant with card present sales, most bank merchant account programs are fine. However, if you are an Internet merchant, banks are usually like fish out of water in terms of any ability to provide technical support or any real knowledge of your business model or how these processes work.

They will be happy to underwrite an account if it meets their criteria and setup a 3rd party gateway but that is pretty much where the support stops for most banks.

That is why I have always been an advocate of selecting an experienced ISO/MSP in the Internet merchant processing industry who works with businesses just like yours. By obtaining a merchant account with such a processor, you'll be much better off and still have the full security of a bank standing behind your processing.

Plus - if you are in the U.S. - you have a huge number of great options to choose from.

To be perfectly honest, I think you stand an even greater chance of running into an issue with a bank who is unfamiliar with Internet merchants than with an ISO/MSP who is.

The important thing to realize is that chargeback ratios presets and "flags" are set by risk departments who work at banks and ISO/MSP's and Visa & MasterCard themselves track chargeback compliance ratios on entire portfolios as well as on individual merchants if the situation goes past certain pre-defined limits. Visa/MasterCard set the overall rules & guidelines but the implementation is up to the acquirer who boards and manages the merchant account.

So by working with a bank directly vs. an ISO/MSP and their sponsoring bank, you really aren't escaping or avoiding any of that at all. In fact, I think that in most cases, you are going to put yourself even more on the radar in a lot of cases. The less experienced a bank (or ISO/MSP) is with dealing with Internet merchants, the more risk adverse they are going to be. At the first sign of trouble on an Internet merchant account, their immediate conclusion might be to close down the account or take more aggressive than is warranted action on it.

That said, when selecting a ISO/MSP - you need to really ask them about their risk policies. What kind of tolerances do they have for the occasional month where the CB ratio exceeds the 1%? Do they automatically put a hold on the account? Is it fully automated or do staff members review each situation on a case by case basis? Do they provide any kind of online reporting for your CB compliance so that you can see your stats and trends? How are chargebacks handled? What kind of chargeback representment / reversal support is provided?

This is the area where there is a HUGE variance between one acquirer and another. One ISO/MSP might handle it one way which creates an endless series of horror stories; while another might handle it in a completely common sense manner that ends up helping a merchant to address the situation and reduce their chargebacks in a prudent manner whereby all parties are satisfied and safer for the effort.
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Old 08-04-2009, 09:42 AM
liquidroofcoatings liquidroofcoatings is offline
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