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Mojo -> RE: Accepting on-line payments (9/29/2005 11:40:31)
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Just use Wells Fargo as the merchant and Authorize.net as the gateway. Done. You'll never have problems and if you do both of them are outstanding in solving problems. Since I moved to Authorize.net 3 1/2 years ago I have never had a problem - not a single one. I have had up to 7 different accounts and have processed millions of dollars in sales. My clients who have chosen that combination have also experienced the same results.
I am not selling merchant or gateway services nor do I indirectly make money by promoting them. Authorize.net is the best gateway.
Let's talk about the real issues with merchant accounts.
When you set up your merchant accounts you will be asked various questions about what you sell. Make sure your DBA name (the name that will be on the customers credit card) closely matches what you sell. I once sold fancy bracelets - a lot of them. Unfortunately, I also had a larger than normal amount of chargebacks (we'll talk about those in a bit). As it turns out, the DBA name on the customer credit card was just a generic name from a generic website. Once I changed the DBA name to 'generic BRACELETS' my chargeback rate dropped like a rock. In short, have a name that customers will immediately recognize on their credit card. Also, have the most important part of the name in the front if your name is made of multiple words as many credit card statements will clip off part of the name so that it will fit.
You will also be asked about your transaction limit. This term will change from merchant to merchant, but what they are asking for is the dollar amount of your average transaction. Fudge on the high side when in doubt. If you are selling $50 widgets and told the merchant your average transaction would be $50 your fine. As soon as you start selling $100 widgets you may find yourself in trouble. I'll talk about trouble towards the end. A merchant may also ask you about your daily transaction amount. That one always bothers me because how in the world do you know? I sold 7 nursing pumps several days ago from one site that had around 90 unique visitors. Yesterday, with the same number of visitors, I sold 1. Who knows why?
Monthly transaction limit. This may be the most important question you will answer. How much will your montly sales volume be? At first, you may think it is not that big of a deal. If you sell $5000 worth of product in month 1, 2 and 3 and then in month 4 you double your sales to $10,000 everyone should be happy. You make more, the merchant bank makes more and Visa makes more. Right?
Wrong. There is always a concern that either you (the merchant) are stealing or that your account has been compormised in some way. Imagine for a moment that you have been selling for a year and decide to steal some money and run off to Canada. The easiest way to do it as a merchant is to process all your old credit cards once or twice, withdrawl the $100,000 from your bank and hit the road. In this case, the merchant bank will take the hit. So, in order to better protect themselves they set a monthly limit on your account.
This limit is taken very seriously by the merchant bankers. I should point out that not all merchant banks are created equal. The best ones will call you before your account gets out of control. Wells Fargo can offer you an unlimited monthly transaction limit. They will set a limit and if you go over it they will call you to make sure everything is cool.
If you think you will sell $10,000 worth of widgets - apply for a $30,000 monthly limit. For whatever reasons merchant banks do NOT like to increase your monthly limit right away. They won't increase it without you jumping through a lot of hoops anyway so get it right the first time. Seriously, this is important. If you are selling $10,000 per month in July, August and September you may be able to sell $40,000 in November and December. Plan accordingly.
Chargebacks are a huge frustration to any merchant running a sizeable online business. A chargeback is when a customer contests the charge you made on their card. Some quick notes about chargebacks:
- You receive a fine wether you win or lose
- You always lose at first
- You can't remove the mark of the chargeback from your account - even if you win
- Too many chargebacks and your account will be terminated
- Merchant banks keep track of your chargeback record. Try moving to another merchant after you were terminated for excessive chargebacks...It will be very tough and you will have high rates and a low monthly volume.
- You can't avoid the perfect chargeback. There is no defense.
- Visa/MC/AMEX love chargebacks. They make money off your fine even if you prove your innocent
- Often you will lose the product, the fine and the money the customer paid
All a customer has to do is call their credit card company and say the product was not as advertised, broke or that they didn't order it and you will receive the chargeback. If you can prove that they received the order then you may win. This requires that you ship everything with signature confirmation.
If Lisa Liar pulls a fast one on you and starts a chargeback you will have the opportunity to show the merchant bank that you actually shipped her the order. If she signed the signature card from UPS, FedEX or even the USPS then you will likely win. Winning means you get to keep her money, she keeps the product and Visa keeps your $20 or $25 fine.
If Lisa Liar knows what she is doing and she either she signs a different name or she has someone else sign for the product - YOU WILL LOSE. Every time. In the case, losing means she keeps the product, you are forced to return her payment and you pay the fine.
It is very easy to steal from online or catelog orders. All you do is don't sign for the pack and then tell your credit card company that you didn't order the product. The good thing is there are very few completely dishonest people.
The most common reason for a chargeback is some kind of misunderstanding between you and the customer. Usually, the customer doesn't recognize the charge on their credit card statement. When all they can see on the statement is - "The world's grea..." they may not remember they purchased a tee-shirt for $19.95 from "The worlds greatest tee-shirt company" a month earlier. These chargebacks are usually easy to fix. A call to the customer and a fax to the merchant bank are often enough to do the trick, but you still pay the fine and you still keep the bad mark of a chargeback on your account.
Penalties. Chargeback are their own penalties in a way, but the merchant banks have other more powerful ways of getting to you. About the worse thing they will do to you is to freeze your merchant account and keep your money. Cash flow is very important in any business and when you charge $6,000 on customer credit cards you *have* to ship the product even if the merchant is not releasing the money. If this happens, you in the hole for 6k until thing correct themselves. The easiest way to cause a merchant to freeze your account is the go over your monthly limit. Whammo! I should note that they don't have to tell you when they are freezing your account. You will just find out when your bank account hits zero. It hurts...
Christmass 2002. I had a new merchant account for a new business and was told over the phone that my limit ($40,000 on that account) reset itself on the 12th of each month. Cool. November was not too busy, but December was getting crazy. I had processed less than 10K between November 12th and December 1. By December 9 I had processed enough to bring me to the $40,000 limit. At this point, I continued to take orders, but just held the cards and emailed the customers that their orders would be shipping in a few days. On the 13th I processed another batch of cards (I batch process my orders) and continued to process cards for another few days. Unknown to me, the merchant account actually reset itself on the 1st of each month (that made more sense to me, but I was told otherwise). Before long, I noticed no money was being deposited from that account. I called them and was told they had froze my account and held my money. Bummer. They kept over $28,000 for almost 3 months. I still had to ship all the product. If I didn't have other online businesses that kept cash flow moving I would have been in a *very tight* spot. As it was, I was just in a tight spot. :)
Reserve. Find out if your merchant bank will keep a reserve. If you have good credit the merchant will not ask for a reserve unless you screw something up (see my Christmas story above). This is money that the merchant bank keeps to pay off any customers who may do a chargeback in the event you quit doing business. The reserve can be as little as 5% of each order or the merchant may decide upon an amount. After my problem mentioned above, the merchant kept $10,000 for close to 11 months ( I dropped them after they did that to me so they kept a reserve). They CAN keep your money. In the fine print on the 15 pages of contract that you will sign - you agree to it. Eventually, they will return it, but most can and will keep a reserve for at least 3 months. The most common time I have read about is 6 to 9 months... unless you really piss them off.
I'm skipping many of the small things that help make a successful business, but it is just too much to write down in one post.
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