When a company sets up a merchant account, they may only have in mind that they want to accept credit card payments at a competitive rate with a company they can trust.
There is actually much more to a merchant account than the previous statement.
From an Independent Sales Office or Credit Card Processor’s perspective, there are certain details that are built into the merchant account while it is being created. These details will determine what rates, what cards, and for what amounts a business can accept payments for.
When providing the company you are signing up with your information, it is very important that A. you provide them the right information and B. the right information is submitted. An error on either party’s sign could cause trouble down the road.
Here are the four important factors that determine your merchant account’s rates and funding.
Average Transaction:
Merchant accounts are monitored by a risk department. Keep this in mind when you are providing information when applying for a merchant account. The average transaction that is inputted into the merchant application will have a bearing on how the risk department monitors your account. For instance, if your company is a manufacturer and the average transaction is listed as $50 and your initial two weeks of running transactions show a trend of $2,000, you will be running into issues. Typically, the risk department will ask for additional financial information to back up this different data.
Highest Transaction:
For risk purposes, a maximum dollar threshold is placed on a merchant account. A lot of this is based off of the industry type. However, there may be certain instances where a transaction much higher than the average purchase is made. For instance, a restaurant accepts payments on average of $25.00, then they bring on a corporate catering customer who spends $3,000. The transaction will be flagged as out of the ordinary. There is a more than likely chance that they $3,000.00 is going to be withheld from the merchant’s bank account.
The merchant will then need to provide evidence that the transaction is valid. This might include invoice and receipt of the transaction as well as potentially needing to communicate with the client.
There are plenty more examples of where these types of situations can occur.
If you are a business owner and something changes in your business where you need to accept a credit card much higher than your average amount, simply call your credit card processing company’s customer service department and notify them before accepting the payment. They should be able to either make a one time allowance occur or better yet, raise your maximum transaction threshold.
MCC Code:
What is an MCC Code? A Merchant Category Code (MCC) is a four-digit number listed for financial services. MCC is used to classify the business by the type of goods or services it provides. If you have the incorrect MCC Code, your business could be paying higher fees due to you qualifying for the incorrect Interchange rates.
Card Present vs. Card Not Present:
Similar to what was referenced with the MCC Code, the card present vs. Card Not Present characteristic also impacts the fees your business will pay. If most of your customers are calling in over the phone or making a payment on your website, you need to be set up with a Card Not Present merchant account. What happens if you are set up as Card Present? You will not qualifying for the best Interchange rates resulting in overpaying for your credit card processing fees.
Your takeaway should be to double check these details with your credit card processor.
Our goal is to provide businesses with the best mix of security, solution, and fair, honest pricing. If you are interested in a consultation from True Merchant, we are always happy to help.
Authored by: Jimi Romanus 4-15-2018
