Recommendations for Merchant Accounts?

Hello all. I am a jeweler who has started doing wholesale shows.
Some of my customers are requesting to use credit cards to pay for
orders. While searching through the internet and yellow pages I
encountered several different types of merchant accounts for
processing credit card orders. Companies online seem to have better
rates and startup/monthly fees than a traditional bank. While the
money savings is good, I am concerned about fraud. Even companies
that have a good Better Business Bureau review use intermediate
companies to process the transactions and some of these intermediate
companies have terrible BBB reviews (so confusing).

Does anyone have any recommendations for Merchant Accounts? Any
suggestions will be greatly appreciated. Thanks.

I use Discover merchant services, which allows me to process all
major cc’s and their rates are very competitive, with extremely low
fees and no monthly minimums. Because they are an international
merchant (Discover card) I wasn’t concerned with fraud at all. You
can google their site if you are interested.

Good luck!
Carrie Otterson

As an Orchid member and a representative for ABANCO payment
acceptance processing services, I will forward you the post I wrote
last month regarding cc companies. Hope this helps.

Virginia Vivier
Artes Primitiv

Credit Card machine technology and software changes make choosing a
payment acceptance processing program as complicated as choosing a
cell phone plan that fits your needs. There are many choices, but
if you understand which plan fits your sales patterns, then you can
make an intelligent decision.

Here are some considerations for offering payment accepting
processing programs.

  a.)  Statistics show that accepting credit cards can increase
  your revenues by 25% or more. The ability to accept all major
  cards, Visa, MasterCard, Discover, Amex, Diners, Carte Blanche
  is a plus. 

  b.)  Many merchants don't accept American Express because
  their rates are higher.  But facts show that American Express
  card holders have an average income of $85,000 per year and
  their average ticket sales are 31% higher than Visa or MC
  holders.  2 out of 3 Amex card holders will NOT go into a store
  that does not display Amex decal on the window. Visa sale of
  $200 - 2% CC fee = $196.  Amex sale of $262 - 4% fee = $251. 

  b.)  Visa card holders represent 47% of the market. MC holders
  represent 24% of the market.  Amex represents 16% of the
  market & Discover card holder's represents 5% of the market. 

Gift Cards

Gift cards are a great investment for jewelers and artists. You can
offer them at Art Festivals, Trade Shows and On-line. Jewelry is a
natural gift item itself. Gift cards are personalized with your
logo. You submit a copy of your business card and the Gift card is
created to represent your business. You don’t have to own a CC
machine to process a Gift Card. They can be run on a Virtual
Terminal online.

The cost to setup a Gift Card program is $295 (one-time fee). You
get displays for your counters and 50 cards initially. Additional
cards are generally $1.00 apiece unless you order 1,000 @ $0.80 each.
The transaction fee is only $0.35 per swipe. No additional fees.

Statistics show that your return is very high since generally only
85% of the gift cards are actually redeemed. 15% are lost or just
forgotten. So, if the item sold has a 100% markup (a $200
necklace) and the gift card covers the price with 15% left over, you
have made a $115 profit. The gift card cost of $1.00 + $0.35
transaction fee = $1.35 total fee.

If you are just starting out with Gift Cards, figure the $295
one-time setup fee, divided by 50 cards, and the cost per card is
$5.90 plus the $0.35 transaction fee. The $200 necklace gives you a
profit of $100 minus the $5.90 card + $0.35 transaction fee = $93.75
profit for something that may not have sold if the Gift Card had not
been available.

Smart Card / Chip Cards

A chip card is simply a piece of plastic with a computer chip on it
that can store a large amount of data. Some of the cards have more
memory on them than the original PC’s of the 70’s. Loyalty Cards
can be used by a merchant to store customer and
demographics. These cards can prompt for discounts on items, count a
quantity (i.e. buy 12 get next one free), store a value (such as gift
certificates), or all of the above. It is a very effective way to
get customers to come back into your place of business.

Accepting Credit Cards - At what cost?

The average business accepts 17% cash, 21% Debit Cards, 40% Credit
Cards and 22% checks.

What does a valid credit card transaction require?

  1.)  Proof the card was present at the time of the
  transaction, i.e., card swipe on POS Terminal or manual imprint
  of the card. 

  2.)  Signature on the Sales Draft.  If not signed by
  cardholder the sale is not valid. 

  3.)  Promised goods and services must have been delivered at
  the time of the sale. 

If any one of these components is missing, then the cardholder has
the opportunity to contest the transaction. (Charge-back)

Charge-backs: if goods and services are unsatisfactorily delivered
or performed and the cardholder notifies their bank within 6 months
(even longer in some categories) of the transaction, the merchant
might receive a charge-back which means the money is taken from his
checking account and returned to the cardholder.

7 Benefits to look for in a Payment Acceptance Processing Program:

  a.)  Electronic Signature Capture.  A CC machine that stores
  and retrieves your customer signatures, resolves disputes
  without your involvement.  

  b.)  Discrete Receipts:  Printed receipts that hide all but
  the last four card numbers, protecting your customers from

  c.)  Auto banking:  This saves you time, money and hassle.  No
  more trips to the bank, standing in line with receipts for
  deposit, your money is automatically deposited in your account
  within 2 business days. 

  d.)  Return Policy:  Your return policy is automatically
  printed on your receipt.  Protects you against customer
  disputes if that should occur at a later time. 

  e.)  Upgraded security System:  Extra peace of mind at no
  extra charge. CC machine can be programmed with password entry
  so that unauthorized staff cannot use the machine fraudulently. 

  f.)  Smart Card Ready:  Lease equipment that can be upgrade
  quickly and easily. 

  g.)  ATM / Debit Card PIN pad:  Debit transactions cost much
  less than CC transactions. 

Debit card usage surpassed credit card sales for the first time in
2002 - a trend that’s expected to continue. Clearly, more and more
consumers prefer debit over credit - very good news for your business
and here’s why. P.I.N. based transactions Cost You Less!

There are 2 ways customers can use a debit card, with and without a
P.I.N. when you accept payment without a P.I.N., you pay regular
credit card interchange rate and transaction fees, which can total
more than 2% of the sale. You also have the same chargeback risk, as
with a credit card. By accepting a P.I.N. based debit, all you pay
on average is 60 cents per transaction, and the sale is RISK FREE!
Here’s how accepting P.I.N based debit could save you 63% on an $80

  Off-Line Credit: 1.69% + 28 cents = $1.63     

  Debit P.I.N. Based: $0.60                                     

  You Save $1.03 

Credit Card transaction fee Rate Structure:

Every transaction for every credit card bears a cost by the merchant
called the “Discount Rate.” This rate is a percentage of the amount
of the transaction. There is also a “Transaction Fee” that is a flat
amount regardless of the amount of the transaction.

Most banks have a 3-tiered system for determining the rate that will
be charged to the merchant. This system is based on the time a
merchant batches out and the type of transaction either swiped or
keyed in. This only applies to VISA and MC transactions.

Qualified Rate (Best rate available)

  Card swiped and batched within same logical day 

  A typical qualified rate is 1.79%. If a merchant runs a $30
  transaction, they will pay $30 x 1.79% = $0.54 in discount

Mid-Qualified Rate (percentage added to Qualified rate)

  Card swiped and batched next logical day (2nd day) 

  Keyed entry and batched same logical day 

  Voice authorization 

  A typical surcharge for Mid-Qualified Rate is 1.20% over the
  Qualified Rate.  If a merchant ran a $30 transaction that
  went mid-qualified they would pay 
  ($30 x 1.79%) + ($30 x 1.2%) = ($0.54 + ($0.36) = $0.90 in
  discount fees. 

Non-Qualified Rate (higher percentage added to Qualified Rate)

  Card swiped and batched after next logical day (3rd day) 

  Keyed entry and batched next logical day (2nd day) 

  Some foreign cards, VISA Corporate Cards, Gov. purchasing
  cards, and manual presentments. A typical surcharge for
  Non-Qualified Rate is 1.75% over the Qualified Rate.  If a
  merchant ran a $30 transaction that went mid-qualified they
  would pay ($30 x 1.79%) + $30 x 1.75%) = ($0.54) + ($0.53) =
  $1.07 in discount fees. 

Performing a batch every night is very important for a merchant
since their discount rate is partially determined by when they batch.
There are times that a merchant might forget to batch, which will
downgrade his transaction and cause it to be charged at a higher
discount rate. (ABANCO has built into its software an automatic batch
for all credit card transactions. The software is programmed to see
if there are any un-batched transactions at a predetermined time. If
there are, the transactions are automatically batched at the
merchant’s option of either 6 PM or 12 AM and sent for reconciliation
and payment.)

Transactions Fees: VISA and MC only

Qualified Rate
Typical transaction fees are $0.29 per item.

Mid-Qualified Rate
Typical surcharges are $0.10 per item.

A Mid-Qualified
transaction would be charged $0.29 + $0.10 = $0.39 per item

Non-Qualified Rate
Typical surcharges are $0.10 per item. A Non-Qualified transaction
would be charged $0.29 + $0.10 = $0.39 per item.

Examples: A merchant rings up a transaction and swipes a bankcard
in the amount of $250. His rates are 1.79% and $0.29 per
transaction. This merchant would pay $250 x 1.79% + $0.20 = $4.77.

If this same transaction were hand-keyed because the magnetic strip
on the back of the card didn’t work, this transaction would now
downgrade to Mid-Qualified. This merchant would no pay the $4.77
from above + ($250 x 1.20% + $0.10) = $3.10 + $4.77 = $7.87. Please
note there are many reasons that transactions can downgrade.

If this same transaction were swiped on a corporate Visa or MC, the
merchant will now pay the $4.77 plus the Non-Qualified surcharges.
This merchant would now pay $4.77 = ($250 x 1.75% + $0.10) = $4.77 +
$4.48 = $ 9.25.

Account Maintenance Fee - Some CC processing companies charge a
lower rate but their account maintenance fees are much higher.
ABANCO’s monthly accountant maintenance fee is $9.95.

Minimum Fee - There is a $25 monthly minimum on discount fees. A
merchant processing at a 1.79% discount rate would have to process
at least $1,395.65 ($25 / 1.79%) in monthly VISA and MC volume to
avoid paying the monthly minimum. If a merchant falls short of this
minimum, the difference will be assessed. For example, if a merchant
processed only $1,000 in Bankcard volume, he would be charged $7.10
in addition to his regular discount fees.

Batch Header Fee - $0.25 will be assessed each time a merchant
batches out either manually or automatically.

Address Verification Fee - A fraud prevention service designed to
protect the merchant by checking a cardholder’s zip code. The
charge is $.05 per occurrence.

Voice Authorization Fee - an extra fee charged to the merchant when
he has to call in to receive an authorization. The charge for this
is $0.50.

Annual Fee - There is a $75 annual charge, which covers
administrative costs incurred on an annual basis by VISA/MC.


  A.)  A retail merchant does 10 swiped bankcard transactions in
  3 days during the course of a month with an average ticket of
  $100.  His monthly payment acceptance processing fees are as

  10 x $100 x 1.79% + (10 x $0.29) + (3 x $0.25) + $9.95 +
  Monthly minimum.  Since 10 x $100 x 1.79% is less than $25.00
  the merchant is charged $17.90 + an additional $7.10 to make
  $25 of discount on the monthly minimum.  We still need to do
  the rest of the equation:  $25 (Monthly Minimum) +$2.90 (10
  transaction fees) + $0.75 (3 batch fees) + $9.95 (Account
  Maintenance Fee) = $38.60.  It will cost this merchant $38.60
  in fees to maintain this account for this example month. 
  Please note, this doesn't include any cost for leasing

  B.)  Another retail merchant swipes 50 VISA transactions
  averaging $50 each and 40 MC transactions averaging $50 each. 
  They also hand-keyed 20 transactions averaging $100 each.  They
  batch out 20 days during the month.  It will cost this merchant
  the following:  90 swiped transactions at $50 each = $4,500 x
  1.79% = $80.55 and 20 hand-keyed transactions at $100 each =
  $2,000 x 1.79% = $35.80 plus the discount surcharge for
  Mid-Qualification $2000, x 1.20% = $24.00.  The transaction
  fees are 90 + 20 = 110 at $0.29 each = $31.90.  The hand-keyed
  transactions have an additional charge of $0.10 each so that
  adds another $2.00.  We know they batched out 20 days and were
  on an automatic system so the fees are 20 x $0.25 or $5.00. 
  The merchant far surpassed the $25 is discount fees so there is
  no monthly minimum.  The Monthly Account Maintenance fee does
  apply (statement fee) in the amount of $9.95.  So this
  merchant's total monthly expenses for payment acceptance
  processing was:  $80.55 + $35.80 + $24.00 + $31.90 + $2.00 +
  $5.00 + $9.95 = $189.20. 

Shop for the lowest rate for your business by calculating your
average ticket sales then multiply by the discount rate and add the
transaction fee. This will give you the Transaction Cost per average

Average Ticket	Discount Rate	Transaction Fee	Transaction Cost
$10		1.60%		$0.30		$0.46
$10		2.40%		$0.00		$0.24
$50		1.60%		$0.30		$1.10
$50		2.40%		$0.00		$1.20
$20		1.60%		$0.30		$3.50
$200		2.40%		$0.00		$4.80

Calculate the Net Effective Rate by taking the transaction cost then
dividing it by the average ticket. This will help you determine
which companies can provide the lowest costs in payment acceptance
processing. It allows you to compare apples with apples.

Mail Order / Telephone Order / Internet Orders

Any merchant that does in excess of 25% of their transactions as
"card-not-present" is considered a MOTO merchant (Mail Order Tel
Order). These merchants are in a higher risk category due to the card
not being present. As with all other processors, ABANCO’s MOTO rates
are considerably higher than standard “card-present” swiped rates.
ABANCO’s MOTO rates are 2.49% and $0.35 per transaction.

If you are selling jewelry items online and want to accept credit
cards, you can qualify for a Virtual Terminal. The setup cost is
$299 (one-time fee) with monthly internet access fee of $19.95. The
discount rate would depend on the best rate your business could
qualify for.

Leasing Equipment: 98% of our customers lease their equipment for
the following reasons:

  1.)  Allows for positive cash flow rather than paying for
  2.)  Deductible straight expense for tax purposes. 
  3.)  Fully transferable lease to newer upgraded equipment. 
  4.)  Equipment services are constantly being improved. Does
  not lock merchant into outdated machines. 

Wireless systems generally lease for $95.95 / month. Top-of-the-line
systems that do everything except “check” swipes, lease for $79.95 /

Re-Programming older equipment the merchant owns:

Many models of equipment can have P.I.N. pads added to accept Debit
Cards and reprogrammed to accept ABANO newer systems.

There are many ways to “wheel & deal” with lease buyouts and
equipment swaps. Each merchant can be quoted depending on their
unique situation. The first step is to take a look at your latest CC
statement and see what ‘hidden’ fees are being charged that you can
eliminate by shopping around. (ABANCO costs less per month 89% of
the time.)

Final notes:

To qualify for ABANCO payment acceptance processing (as well as most
other processors) a merchant submits an application and it is
approved based on the amount of time the merchant has been in
business and their credit. Business verification consists of
photographs of the inside and outside showing signage of the business
name, copy of business license, Tax ID or seller permits, etc.

Mail Order / Internet businesses complete an application with photos
or copies of the merchant’s advertisements or brochures. DBA name
should be stated on the Application Agreement, the type of goods or
service sold should match the on the Application.

*Check Processing can be covered at a later time, and if anyone is
interested, I will put together another “facts” posting on the
latest ways to accept checks.

I hope this has been beneficial and not too complicated to
understand. Please feel free to call me if you would like a quote on
your individual situation. Realize that I will need a copy of your
latest CC statement to see if we can offer you a lower rate. You can
"black- out" any confidential if you prefer. My fax
number is: 520-616-8684.

I look forward to helping anyone who needs advice.

Best regards,
Virginia Vivier
Rep: ABANCO International
Tel: 520-616-8683

I have posted on this topic before and it’s been brought up a number
of times but I’m going to throw my 2 cents in again. There are a
lot of companies that offer merchant accounts and the rates vary
widely. However, it is always my belief that it is better to work
with someone with whom you already have a working relationship. In
this case that is your own bank. All banks offer merchant services.
If you use your own, you are working with someone who already knows
about your credit worthiness and someone with whom you can work face
to face. If you have a problem you can go visit your local loan
officer and deal with them directly. Will they always be the
cheapest? No, but for the few hundred dollars (and this is extreme
unless your sales are in the millions) you might save annually by
using some slightly cheaper service you will have a lot more peace
of mind. Just as in our own trade, the cheapest is rarely the best
option. It may save you money on an immediate level but in the long
term you may have far more problems. Also, you should note that all
quoted rates are negotiable. I regularly go back into my bank and
ask for a reconsideration on the rate based on the amount of usage
and average ticket.

Daniel R. Spirer, G.G.
Daniel R. Spirer Jewelers, LLC
1780 Massachusetts Ave.
Cambridge, MA 02140

Hi Angela!

I recently went through the process of trying to decide on who to
use. It is indeed very confusing, and terrifying! I am happy with
the people I chose, and recommend them. Here is the person I worked
with: Alea Bruggeman at Descomm. Her e-mail is: She was very patient about explaining things
to me. Do tell her that I sent you to her! (I get some sort of small
thank you)

I remember you from a forging workshop I taught at Metalwerx. I am
glad that you are doing well with your business!!!

All best wishes,
Cynthia Eid