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Frequently Asked Questions – Merchant Services

Frequently Asked Questions – Merchant Services

If your question is not answered please submit it to our Help Desk.

MERCHANT SERVICES FAQ

Review these common answers as you evaluate your merchant services options. Our customer service representatives are happy to answer your specific questions any time. Call us at 1-800-950-0212 to connect with a knowledgeable rep.

What is a merchant services provider? What is a merchant services account?

A merchant services provider makes sure the funds a business customer authorizes to transfer to the business gets to the business account in a matter of days. The authorization takes place when the customer uses a debit, credit or gift card. These transactions occur electronically and via the internet. The merchant services provider can be a traditional or alternative bank or a third-party processor.

A merchant services account is something like a bank account in the sense that money comes in and out. Today’s merchant services accounts allow vendors to monitor income and outflow as easily they do their bank accounts. These accounts are available on all devices and accessible from any computer. 

Who regulates merchant services providers?

Because it deals in consumers’ sensitive, private information, electronic payment processing is highly-regulated. These regulations exist to protect consumers, but also the merchants, processors and issuing banks from hackers hot to steal identity and commit fraud.

The Federal Trade Commission (FTC) monitors merchant services providers and processors, ensuring they do not misrepresent themselves or charge exorbitant fees.

Who needs merchant services? What businesses need merchant services?

Any business that wants to make payments easy for their clients and customers, and particularly B2B businesses needs merchant services which includes a merchant account.

Today, American consumers use credit cards 40% of the time to pay for purchases. They use their debit cards 35 percent of the time and cash just 11 percent of the time.[i] Credit cards are not only convenient, consumers know they can dispute a purchase if they are not satisfied. Credit and debit cards also help consumers track their spending. 

Why do I need merchant services?

When a business establishes merchant services, it can display the forms of plastic it takes in prominent places. This step boosts goodwill in the digital-era’s on-the-go client because credit and debit cards are a hassle-free way to pay (see answer above.) More, research has shown over and over again that customers who use debit and credit cards spend anywhere from 15 to 50 percent more than if they had only cash to spend.[ii]  Finally the ability to accept credit and debit cards acts as a form of credibility, indicating that your business has been operating successfully for a significant amount of time.

Businesses that bill on a monthly basis find that accepting credit cards makes collecting payments a breeze. They simply set up a regular debit on the credit card and those monies come to your account like clockwork.

What do merchant services charge/cost?

Typically, a portion of every sale goes to the merchant processor. This amount runs between 1.5 and 4 percent. This includes all fees paid to card issuers, the gateway and networks via assessment fees. Many factors affect where the per-sale fee lands, including the business’ industry (high- or low-risk), whether point-of-sale (bricks-and-mortar) or ecommerce (website), your volume of sales and amount of average sale. A business in a low-risk industry that has year-round (rather than seasonal) sales gets a lower rate than the high-risk business that sells mostly at Christmas.

How can I negotiate merchant services?

Ask for an “interchange-plus” quote rather than a “tiered” quote. Focus on the “effective markup rate which includes the monthly fee, PCI compliance fee, gateway fee, any annual fee, the equipment warranty fee and the monthly minimum surcharge. Get a list of all of these so you can compare different offers. As with any negotiation, let the merchant processor know that you have offers from other merchant account providers.

Which merchant services is best?

There are thousands of merchant services processors out there. Many of them specialize in certain markets like bad credit or good credit, high or low risk. Determining which is the best merchant services provider for you depends on characteristics of your business.

How can I cancel First Financial Merchant Services?

If your business closes or you find another way to accept payments, you may want to cancel your merchant services account. After all, you don’t want to pay monthly or annual fees for nothing. To get your account cancelled, take a look at your contract and know your terms. First Financial account representatives are happy to walk you through the steps. Call 1-800-315-7791 to discover your options or start the process. Make a detailed record of the call, including time and date and name of account rep. Write down all instructions the rep provides and carry them out. Review your bank statements to ensure the merchant processor has ceased withdrawing money from your account.

Can I get merchant services with bad credit?

First Financial has bad credit merchant accounts for business owners with credit scores, or recent bankruptcies. Our bad credit merchant accounts get you processing debit, credit and gift cards and process ACH payments quickly.

What’s the difference between a high-risk merchant account and a low-risk merchant account?

Merchant account processors and banks view businesses in two categories: high-risk and low-risk. Businesses in high-risk industries tend to have higher chargebacks (returns) and cancellations. Merchant processors also see businesses in a new industry such, as search engine optimization or a peer-to-peer services, as unproven. Many processors also have moral objections to certain industries (gun stores, adult services). These traits of business land it in the high-risk category which means fees are higher to counteract any risks of handling monies involved. Examples of high-risk industries include: golf-club manufacturers (high returns), cannabis businesses (both too new and morally questionable), adult-related services (morally questionable). Low risk industries are auto repair shops, healthcare services and fast-food restaurants.

What is a merchant services ISO or merchant services agent?

Individuals who want to become merchant services ISOs (or independent sales agent) can partner with a merchant account processor. This ISO then acts as the face of the merchant processing business, looking for interested consumers by attending networking events and advertising. This ISO typically gets paid by taking a small percentage of the merchant fees.

 

Why is my business considered high-risk to merchant processors and banks?

Rejection of your merchant services application as high-risk has little to do with your business management skills, products or services. Your business just happens to be in an industry

banks and merchant processors consider high-risk. These organizations have run the numbers to find that those in online dating, travel, water purifiers and many more simply get more returns and cancellations than other businesses. Banks also consider very new industries to be higher risk. These include web development, IT and e-cigarette shops. While relative newcomers to the American economy, none of those are going anywhere. Finally, many banks and processors withhold the right to provide accounts to businesses they consider morally questionable. Businesses in the gun, adult and cannabis industries will pay the higher fees high-risk merchant accounts demand.

Other reasons your business landed in the high-risk category include: the business owner’s poor or bad credit or the business is located off-shore.

Can I get a high-risk merchant account with bad credit?

Yes! By paying a little more in merchant fees, you can still offer the convenience and safety of credit card acceptance. As your business progresses, you should stay abreast of your credit score so that you can eventually qualify for a good credit merchant account.

Are there advantages for high-risk merchants to accept credit cards?

First and most important, customers often only make the purchase if they’re able to use credit cards. Today’s consumers use credit cards 40% of the time to pay for purchases. Consumers turn to debit cards 35 percent of the time and cash just 11 percent of the time.[iii] And a check? What’s that?

Of course, the biggest advantage is that consumers spend from 15% to 50% more on products and services when using credit cards. They hesitate to part with cash In fact, customers often only make the purchase if they’re able to use credit cards. Another advantage is convenience for both the consumer and the merchant. Credit card purchases leave a trail of evidence useful for both parties.

What documents will I need to submit when applying for a high-risk merchant account?

Our customer service representatives can go through all the documentation we’ll need. For now, get the following documents found and kept in one place:

  • Business license
  • A voided check or a bank letter indicating you are in good standing. We can’t accept starter checks.
  • Copy of owner’s driver’s license or passport.
  • Three to six months of business bank statements.
  • Proof of website domain ownership. Screenshots are sufficient.
  • Business marketing materials.
  • List of products and services with pricing.
  • Written overview of business.
  • Resellers must provide any supplier agreements.
  • Those with a current merchant services provider need to provide 3 – 6 months of previous merchant processing statements.

Which industries do banks consider high-risk?

See above as to why banks consider these industries to be high-risk.

The industries they put in this category are: adult-related, airlines and jet charters, bitcoin trading businesses, e-cigarettes, gambling sites, information products and seminar companies, credit repair, medical marijuana/cannabis, nutraceutical and dietary supplements, furniture stores, multi-level marketing, online dating sites, student loan consolidation, website development industry, moving and transportation, technical support, travel agencies and water purifier businesses.

Can online high-risk merchant services provide everything a bank can?

Absolutely! Both traditional and online, alternative lenders provide merchant services. The automation and internet location online account providers enjoy, however, keeps costs far lower than those traditional lenders face. Online merchant services send money from account to account with fraction of the operational, marketing and overhead costs traditional banks must pay.

Further, online merchant accounts have the same high level of security traditional banks use. The U.S. Treasury Department and the Federal Trade Commission insist on “banking-level” or 128-bit encryption for every entity that handles money and personal information whether they’re online or bricks-and-mortar.

Is my high-risk merchant account connected to my bank account?

Yes. Credit card money exchanges will happen electronically. If you are a sole proprietor, you can use your personal bank account. Any accountant will tell you, however, that even the smallest business should have a business bank account. It makes taxes and staying out of trouble with the IRS far easier.

Other businesses must have a business bank account where First Financial can deposit cleared payments.

What is a chargeback? Will chargebacks affect my merchant account?

When a cardholder disputes a transaction on an account, the bank where the credit card was issues puts the funds on hold until it can investigate. If investigators find fraud was involved in the transaction, the bank takes back the full amount PLUS a fee.

While banks understand that mistakes happen, too many chargebacks indicate to them that the business may be operating in an untrustworthy fashion. Too many chargebacks can lead to a business going from low-risk rates to high-risk rates and fees. It can also prevent them from being able to accept credit card payments at all. Landing on the Terminated Merchant List (TML) can torpedo your business, particularly if you’re highly depended on credit card purchases.

Can I avoid chargebacks?

There are several smart steps you can take to make sure customer payments aren’t disputed. First, make sure your business name and website name match. Put your phone number and other contact information on your receipts so that the customer will choose to call you first to get their money back. Consider direct refunds your friend as they will keep the customer from calling their credit card issuer. Finally, always provide excellent customer service. Research exists that the cold, disconnected doctor gets more lawsuits than the inept but friendly one. This is the era of the customer. Do everything you can to keep him or her happy, even if it means losing money on a transaction. Do not stand on principle.

What is the interchange fee?

Credit card issuers Visa and Mastercard take a fee for every transaction. The bank that issued the card pays the majority of it, but puts a portion of it on the merchant’s bill. This small amount is called the interchange fee.

[i]  http://www.tsys.com/Assets/TSYS/downloads/rs_2016-us-consumer-payment-study.pdf

[ii] https://www.nytimes.com/2016/03/27/your-money/credit-cards-encourages-extra-spending-as-the-cash-habit-fades-away.html?_r=0

[iii]  http://www.tsys.com/Assets/TSYS/downloads/rs_2016-us-consumer-payment-study.pdf

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First Financial ® Corporate Headquarters 2850 Womble Road Suite 100-604 San Diego, CA 92106

Client Service Center: Main: 1-800-315-7791 Fax: 1-800-215-0217 (Monday–Friday 5:00am–6:00pm Pacific or 8:00am–9:00pm Eastern)

Merchant Services / High Risk Merchant Accounts: 1-800-950-0212 Fax: 1-800-215-0217

 

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