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How to Negotiate with Merchant Service Providers
April 17th, 2009 | Author: 
According to one study, 173 million people use credit cards. Personal debt is increasing from credit cards, but people still rely on them. Whether your company is online or offline, selling products or providing services, accepting credit cards and applying for a merchant account is a must. Before you decide on a merchant services provider, here are some tips to help negotiate a better deal.
- If your business is considered “high risk” meaning you operate a company that could have multiple returns and complaints (e.g. gaming, online adult stores), you might be at the provider’s mercy for rates and terms. If your sales volume and credit rating is good, you have room to negotiate.
- If you currently already use a merchant account service and are just looking to switch companies for better rates and repayment terms, you can usually negotiate with your current company before switching.
- If you need equipment for your retail store such as a credit card machine or terminal, you can negotiate these along with processing software to be included in the cost of the services.
- If you do get denied from a provider because your business doesn’t meet their qualifications and risk guidelines, don’t bargain – look elsewhere. There are literally thousands of companies that provide these services.
- Merchant accounts link between your customer’s credit card processing account and a business bank account so if you operate online, you’ll need a “gateway” software that collects and encrypts credit card information. If you operate an ecommerce site, make sure you find a company offering the software compatible with your existing website. This can save you hundreds of IT consulting fees.
- If you process credit cards at trade shows, music shows, festival concerts, or any other type of remote location, negotiate a free portable terminal or one to rent for a few months.
- If you sign an agreement, review the agreement thoroughly. Pay-transaction fees, chargebacks, “reserve” funds, and monthly minimums can all be in the agreement, but are hidden. Sometimes you can negotiate the length of the service contract agreement, but if you can’t, ask about credit card processing cancellation fees.
Image by LotusHead.
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About the Author
Betsy Brottlund is the Director of Marketing at Resource Nation, an online resource that provides expert advice on purchasing and outsourcing decisions for entrepreneurs and business owners ranging from payroll services to phone systems. Brottlund frequently contributes to several sites that offer tools and advice for business owners, including Dell and BizEquity. Previously a communications consultant, Brottlund has worked with start-ups to Fortune 500 companies managing their marketing and communication programs.
Visit Betsy Brottlund's profile and other posts.
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Some great tips
Thanks :)
Betsy, Thank you for this post. As someone very familiar with the Merchant Services Industry, with all due respect, here are a few further suggestions…(and disclosure)
Although there are thousands of companies that offer these services, there are only a handful that actually “perform” the services. Most organizations are simply Independent Sales Otganizations, or ISOs that simply work as middle-men between you and the actual provider (therefore adding profits at every step) Many ISO’s actually repreent a local bank. Since the local bank doesn’t actually do processing they are often selling on behalf of another ISO that represents an actual processor. There an be as many as six “middle-men” between you and the actual processor. The problem is, it is an unregulated industry and many of these ISOs represent themselves as direct, when in fact they are not.
As far as the equipment, just purchase it. Leasing equipment is one of the most outrageous and sickening trends of the ISO industry. The worse case I am aware of is someone leasing a $200 machine for $59/month for… ready for this… 16 years. That’s about $11,000 more than cost.
Nothing is free and anything you work into the deal is going to cost you more in the long run. Remember, this is an unregulated industry. A brand new terminal can be purchased for as little as $200. If you are just starting out you can buy used on e-bay. (Note: if you sell terminals on ebay make sure you clear the software so noone can access your bank accounts).
Never pay for software and make sure your terminal, or software is not proprietary. This will prevent you form using that terminal with any other provider if you decide to switch.
At this time, portable terminals wholesale at over $1,000. Be careful with anyone offering a free one. UNless you are doing > $500,000 in CC processing you are getting ripped off by anyone giving away a free wireless terminal – guaranteed!
Betsy, than you very much.
I hope this helps
Mike
Thanks Mike. Appreciate the additional tips.
If you are prepared to open your mouth and discuss different options with a representative,it is easy to negotiate with merchant service provider. Every merchant account you come across has one thing in common: The company providing it wants your business. If you remember this, you would be able to save a lot dollars a year.
Well said. The take and give situation is often underestimated – You need them as much as they need you. So, why falter and accept terms less beneficial?