Merchant Account Processors: Frequently Asked Questions

Today, being a successful merchant requires merchant accounts. Merchants can receive an account through an independent selling organization (ISO) or a bank. In either case, a bank acts as the processor for the account—a fact that some merchants are initially unaware of. Below, we answer questions about ISOs, their banks, and issues pertaining to their relationship.

If ISOs don’t processes account transactions, what role do they serve?

Also known as merchant service providers (MSPs), ISOs provide the infrastructure for merchant accounts, and the support necessary to maintain them. That is, the means to receive debit, credit, and check payments online, in store, over the telephone, in the mail, or at remote locations is provided by an ISO. The ISO’s bank (a.k.a. acquiring bank) processes the payments. ISOs and banks are different types of businesses that benefit from helping each other.

How can one be sure an ISO is legitimate and above board?

Becoming a legitimate ISO requires two steps. First, a bank must accept an ISO for sponsorship to a credit card company. Then, the credit card company must accept it as worthy of offering credit card merchant services. To gain these acceptances, an ISO must have excellent finances and business planning.

ISOs are required to use an acquiring bank that has a physical location. This bank must be listed on the homepage of an ISO’s website. Nevertheless, merchants should check the record of an ISO at the Better Business Bureau (BBB) before contracting with it.

What fees are collected on a merchant account?

There are two types of fees that are commonly collected on a merchant account: transaction fees and monthly fees. These fees benefit the merchant account provider and its merchant account processor. Examples of common transaction fees are:

  • Authorization fee. This is charged when a sales transaction is sent to an acquiring bank for approval.
  • Discount rate. This is a percentage of each sale that satisfies a collection of fees, charges, and dues required of a credit merchant.
  • Batching fee. This is charged when a merchant clears its terminal at the end of the day, sending its transactions to an acquiring bank for payment.

Examples of common monthly fees are:

  • Gateway fee. This is charged for the monthly use of a payment gateway, such as a virtual payment gateway.
  • Statement fee. This is charged for the preparation of a monthly statement, and applies to both paper and paperless statements.
  • Monthly minimum fee. This is charged when a merchant does not accrue a certain amount of transaction fees in a month. The fee is the difference between the required monthly minimum and the amount accrued.

The amount for these varies by account type and MSP.

I’ve heard that some MSPs have hidden fees. What are these fees?

Not all MSPs have hidden fees, but some do. Examples of common hidden fees include: an annual fee, over limit fee, reserve account fee, encryption fee, customer service fee, retrieval request fee, and the list goes on.

How is AVPS different from other MSPs?

AVPS is different from other MSPs in critical ways. First, we have superior industry experience: we have provided Small Business Merchant Accounts for 25 years, and have serviced merchants for over 25 years. Second, we have no hidden fees. Third, we offer a broad range of account options, and strive to offer the lowest fees. Whether you need a merchant account, processing equipment, or you wish to inquire about our merchant account processor, call us today.

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