Ways to Protect Your Business from Merchant Account Fraud

The following is a guest post which is mainly geared towards business owners. Enjoy the post!

If an account provider is going to perpetrate fraud against its customers, the easiest way to do it is through the manner in which the merchant account rate info is presented. Hidden fees can dramatically increase the price of accepting credit card transactions, especially if the profit from those fees has been elevated simply to benefit the processor’s bottom line.

Beware of Buzz Words

For shoppers of all sorts, the word “free” acts like a super-charged magnet. Resign yourself from the start that “free” rarely means “free,” but rather that fees from one item have been spread out over other charges to mask them. A standard of this kind of packaging language is “no terminal fee.”

In any evaluation of account offers from merchant service providers, you want to have enough information to put rates up side-by-side. The main fees you’ll want to check include: setup or activation, termination or cancellation, gateway, licensing, batch, chargeback, retrieval, over limit, bank setup, software, customer support, and annual.

If you see a really big difference from one provider in comparison to the others, that’s where you want to focus. Get an explanation for why the rates are so different and never proceed with an account agreement unless you get real, concrete answers — in writing — to your questions.

Advertising Language Hides at Best, Lies at Worst

Be on the lookout for red flag phrases like immediate activation, no setup fees, and minimum prices. Remember, these people are trying to sell their services to you and want to appear as attractive as possible. The meat of the agreement should lie in the service details, which should be picked apart thoroughly, right down through the fine print.

Related – Federal Reserve guidelines on merchant debit card transaction fees.

Don’t just accept the answers you get from the service provider. Look up terminology and use online search engines to understand more fully exactly what is involved in a credit card transaction as it passes through processing. If you have any reticence about being suspicious, get over it. The money you will be saving is your own.

Because the account agreements and presentation of the varying rates in merchant service accounts can be so confusing, far too many business owners just go with the first company they contact. That’s a serious mistake. Rates can vary by card type, nature of the transaction (for instance a swiped card versus the number being keyed in), and the kind of business you operate.

Credit card processing accounts for merchants are not a “one size fits all” business and you should be wary of any merchant account company that suggests they are. You need an account that is suited to your business model and to the type of transaction you will be most likely to process. In this regard, there is no substitution for careful research and comparison shopping.

Merchant service account fraud through hidden fees is aimed at people who rush through signing up for their account. Don’t run the risk of these fees elevating your cost of doing business to the point that you’re driven from the marketplace.