an individual who once had much, much more than my fair share of
credit card debt (they call it "revolving credit" --I
usually call it by a couple of stronger names), I know that using the
plastic can be all too easy at times. You don't have to count out the
money and part with the actual cash, so there's no separation anxiety
involved. It makes impulse buying quite easy; it's especially handy
in emergency situations. And, if you have a reasonably good credit
rating, you probably get a couple of pre-approved credit applications
in the mail every week. In our first few years of operation, we
didn't take credit cards business for our video services company. Oh,
it wasn't that we didn't want to...we couldn't. Our personal credit
ratings were zilch, due to the failure of a couple of prior
businesses we owned. And most banks told us that our business was
"too young" and lacked a sufficient credit history.
That didn't stop
us; don't let it stop YOU!
Give up? Never! We
knew that adding the options of letting our customers charge their
duplication, transfer and production jobs would increase our sales
volume by at least 50 percent --and that our average order would also
increase by an average 15 to 20 percent. Let's face it; people just
won't have that film transfer done if they don't have the money in
the bank to pay for it next week; and likewise, they'll figure that
the party they wanted you to tape can be produced by someone who'll
let 'em charge the $100 tab at the end of the day, too! But we
persisted in trying to obtain "Merchant Status" and in the
end, we won. And we win every day, every time another customer whips
out the plastic and tells us to "Charge it, please." If you
have a good credit rating --and that also holds true for your
business --you stand a good chance of being approved for merchant
credit card status. It also helps if you've been in business for more
than two years. But even if you haven't, I'm going to teach you the
secrets we learned --secrets that you can use right now to improve
Start with your
First off, start
with the bank that you currently do business with. Speak to a person
in authority. Present a professional, positive image. (Right; wear
your good suit --that dark blue pinstriped model.) You will be
requested to present financial information --both personal and
corporate --including your last couple state and federal tax returns.
So be prepared and bring it all with you.
While you're at
the bank, don't try to hide any negative information about either
your personal credit or your business's financial state. They'll find
out sooner or later and you don't want to look dishonest. Really
impress those 9-to-5'ers by providing a complete business package.
One that includes a profile sheet on your company, copies of your
advertisements, your company's projected earnings for the next three
to five years and --most importantly --GOOD REFERENCES.
Be armed with
third party references (influential friends, good personal friends,
your minister, your lawyer, etc.) and credit references, too. Names,
addresses and phone numbers of your suppliers --your tape stock
supplier, your landlord --anyone you do business with that lets you
charge goods or services and with whom you've built up a good
remind the bank of all the business you currently do with them; your
personal checking and savings accounts, as well as any loans or
mortgages you may have. Let them know if they do grant you merchant
status you will be willing to open up a business commercial account
there (if you don't already have one with them.) Make sure the bank
is aware of who your customers are; hard-working men and women like
yourself who never bounce checks.
The terminal; an
important lever for acceptance.
meeting, you'll need to tell the bank that you want to rent or buy an
electronic authorization terminal. Electronic terminals cost between
$200 - $500, or you can rent one for $20 - $30 a month.
There's a cheaper
way to go, but it's inconvenient. You also have the option of
purchasing a manual card imprinter for about $40. However, with a
manual imprinter, you then need to place a phone call to the credit
card company to get an authorization number in order to accept the
charge (if the amount of the charge is over your floor limit, but
more about limits later). If the line is busy, the card company is
closed, or for any other reason you can't get through, you could lose
You'll find that
banks prefer electronic terminals because it's less paperwork for
them. AND they get to make money off you right away from the terminal
rental payment or the lump sum purchase price.
Why you should go
"electronic," if you can...
terminals offer you some handy advantages, too. First of all, the
authorization process is computerized, so you don't have to waste
your valuable time making phone calls to get the transaction
approved. Secondly, the necessary funds are deposited in your account
in two to three days verses five to seven days with the manual imprinter.
Next Step: The
Merchant Application Form
So now that you've
convinced the bank that you are an honest, hard-working, non-check-bouncing,
pay-all-your-bills-on-time type of person, they're going to give you
a credit card merchant application.
doing the obvious --like filling in the blanks legibly and double-checking
all the figures --you need to pay special attention to one
particular area. It is the question on the form which asks what your
ANTICIPATED AVERAGE SALE will be.
The answer to this
question will determine your FLOOR LIMIT.
No, the floor
limit is not how far you're willing to get down on your hands and
knees to beg for approval, but rather THE SALE AMOUNT FOR WHICH YOU
ARE NOT REQUIRED TO PHONE IN FOR
Example: our floor
limit 50 dollars, so if we were using a
and had just made a sale for $49.99, we would not need to make that
phone call to get authorization. We could just accept the order
because it does not exceed our floor limit. However, IF we were using
a manual imprinter and the sale was for $50.01, we would need to
place a phone call to get authorization. Fortunately we have an
electronic terminal so, like I said before, this is all computerized,
floor limit or no floor limit. The important part here is THE HIGHER
THE ANTICIPATED AVERAGE SALE, THE GREATER THE RISK THE BANK WILL
PERCEIVE YOU TO BE.
If you already
know that you are a perceived risk, there is something you can do to
lessen that risk. Have an agreement with the bank that you will place
a certificate of deposit (CD) to be held in escrow for the purpose of
assuring your merchant status. Remember to bring this up at your
initial meeting if you know it's the only way you'll ever be
considered (and you know who you are.)
If you do chose to
go this route you'll also need to pay special attention to the
question which asks "WHAT IS YOUR TOTAL MONTHLY SALES VOLUME -
WHAT PERCENTAGE OF THAT DO YOU ESTIMATE WILL BE MASTERCARD CHARGES -
WHAT PERCENTAGE WILL BE VISA CHARGES?" This question is
important to you because the banks usually asks for three times the
monthly sales volume to be put in the CD. Too high an answer, you may
not be able to tie up that much money: too low an answer, the bank
may think you do so little business that there's no reason for
merchant status to be granted.
Also, if you are
using a CD to guarantee your status (and who
ever said money
can't buy acceptance was just plain mistaken!), do not allow it to be
held for more than 18 months. Eighteen months without a mishap should
be long enough to prove your worthiness.
What to do if your
bank says "NO!"
First off, don't
give up! Now you just have to do a little more legwork. To start, ask
your bank why they denied your application. Is it because you haven't
been in business long enough, because 10 years ago you had a business
that went bankrupt, your personal credit rating is poor or you just
weren't prepared enough for the interview? Once you know what the
problem is, you can take steps to correct it. Get your business suit
back from the cleaners and try another bank. This time, set your
sights on small banks with only one or two branches. It's best if you
can find one in your area. (It doesn't hurt to look outside your
immediate geographical area, but keep in mind that if a problem does
arise and you need to straighten it out in person, you need to be
able to get there before the doors close.)
Here's why a small
bank is better: small banks are more likely to take risks because
they need all the business they can get to keep up with the big boys.
Small banks in small towns are your best bet. Also check out newly
established banks. Institutions that have been in business for only
the past four or five years did not go through the credit card
charge-back scandals of the greedy 1980's. Because they've had fewer
bad experiences, they're more likely to say yes.
When meeting with
another bank remember what you need to do;
*Speak to a person
professional, positive image.
personal and company financial statements,
and federal tax filings, as well as a complete
*Offer to do all
your business at this bank. This includes transferring your current
accounts (savings, checking, loans, etc.) to the bank which approves
your application, as well as opening up a commercial account there.
*Tell the bank you
want to rent or buy an electronic terminal from them.
So I've got my
merchant account status. What next?
Once the new bank
grants you merchant credit card status, keep your promises. Take all
your business from that mean, old nasty bank that wouldn't grant you
merchant status, and give it to your nice, new bank that did!
Help! I'm not
finding any nice, new banks!
Can't find a nice,
new bank to give you want you want? Try your credit union or check
with professional trade organizations. Or you can look into national
associations that offer merchant services. One that I've talked with
is The National Association of Credit Card Merchants (NACCM). Just
call (407) 737-7500 and ask for Leslie Adams, the sales manager. The
NACCM has been in business since 1982. They're a member of the Better
Business Bureau and the Direct Marketing Association.
According to Ms.
Adams, applying merchants are evaluated on the basis of what they are
selling and how they are selling it. The fees vary, based upon what
you're doing or selling. They work with mail-order, telephone and
home-based businesses. There is no minimum monthly sales quota and
they specialize in working with new companies.
Another option to
consider if you can't get merchant status through a bank is an
Independent Sales/Service Organization (ISO). ISO's work as
subcontractors to banks. Proceed with caution if you decide to go
down this route, as some ISO's have been known to take the money and
run. Make sure the firm you are dealing with is reputable, and that
you know about all of their fees and services up front, so you're not
surprised when your monthly statement arrives. I spoke with two
ISO's. The first was Harbridge Merchant Services at (800) 858-1166.
The representative in the merchant process center informed me that
Harbridge deals primarily with American Express and Discover card.
Their fees are determined by what the merchant sells. All fees are
discounted right off the top, which means you receive a check at the
end of the month which includes your monthly sales, minus a certain percentage.
The other ISO I
spoke with was Data Capture Services at (605) 341-6461. After
speaking with Deb Marlow I learned that Data Capture Systems has been
in business as an ISO since 1987, and here's how they work:
First off, each
merchant is assigned their own merchant number for Visa and
MasterCard acceptance. They work with small business, as well as
home-based, telephone/mail-order and retail storefronts. The more
complicated your business, the more complicated the application
process can be, but even if you run the most simple operation, good
credit is a must. HOWEVER, DCS is more lenient with 100 percent
storefront operations than it is for businesses involving phone
orders. That's because a storefront operation always sees the actual
credit card at the time of payment (or at least they're supposed to),
so it can be verified, in person, whether the card can be used, (i.e.
it's not expired) or that the person using it is authorized to do so.
DCS offers electronic terminals for all types of businesses, and a
portable, mobile unit (a lot like a cellular telephone) for
home-based companies who need to take their show out on the road.
25-100 dollars a month on a lease-to-own basis. Fees vary according
to the type of business you have, but here's what I was told.
[WARNING: fees in real life may be larger than they appear on paper!]
One hundred percent card-swipe storefronts = two percent;
hand-entered, but company employee still sees actual card = three
percent (remember all the paper work that has to be done with manual
transactions - and that cost is passed on to you.) Telephone or mail
orders = five percent. These percentages are deducted right off the
top. The remaining funds are available in your account in two to
three business days.
Some merchants are
also charged a $7.50 'monthly statement'
fee --find out if
you are going to be one of them --and are also charged 20 cents for
each transaction. So it's easy to see how all of the miscellaneous
fees can take a bite out of your profits, but it can be well worth it
when you consider that accepting credit cards can increase your sales
volume by 50, 60 percent or even more --while increasing your average
order by 15 percent or more.
If you deal with
an ISO, be prepared!
Another thing you
need to be aware of is when you call these organizations on the phone
is that most will not mail out information. So there is no chance of
looking over the questions beforehand to prepare yourself. Most want
to interview you on the phone right then and there. If you're calling
them, be prepared with all your financial information --past, present
and future! You should also be aware that the ISO representatives can
be very controlling of the conversation, so make sure they take
enough time to answer all your questions and concerns. You may feel
pressured by their sales tactics, so my advice is to dress
comfortably and don't get nervous. Call them when you've got your
financial information together and you're in an alert-but-relaxed
mood. If you can't find anyone willing to take a chance now and grant
your business Visa and Master card status, you could start by getting
a application to accept American Express. American Express has fewer
biases against new and home-based businesses. To receive a merchant
application, call 1-800-528-5200, and speak to a customer service
representative. Fewer people carry American Express than Visa or
Master card, probably because balances need to be paid in full at the
end of the month, but many companies do use American Express as their
corporate card. And although American Express costs the merchant more
per transaction than the other two cards, getting American Express
status right away can help you secure Visa and Master card.
Other cards you
may be interested in getting merchant
status for are:
Call 1-800-347-6673. With the Discover card you can either purchase a
manual imprinter from them for $20 and mail your transaction slips in
to the company,. or you can lease or buy an electronic terminal. The
Discover card terminals can then be used to process other credit
cards when you become a merchant for other cards.
BLANCHE. 1-800-525-7376 or
Some final words
*Once you do
receive merchant credit card status, NEVER
delay a refund to
a customer. Delaying a refund could result in having your hard-won
status taken away.
*Keep in mind that
just because you may have been turned down for merchant status six
months ago, doesn't mean you can't apply today and succeed. Or even
if the bank next-door said no, a different branch of the same bank
could say yes. SO KEEP TRYING! The higher profits you'll receive for
being a credit card merchant are well worth the extra effort.
*Once you've got
merchant status, let the world know! Your bank or ISO will provide
you with reproductions of your bankcard logos; use them in your ads
and your brochures and your direct mailers. They'll also give you
decals and plastic displays --put them on your doors and windows,
display them in your reception area or on your customer service desk.
When people call you, let them know that you accept Visa or Master
Card or any other cards you handle. They'll appreciate it, and your
checkbook will, too!
RESOURCES: If you
haven't put a business plan together, my Special Report #SR-16V,
"How to set (and keep) your business goals" will help you
do just that. It's just $6 and can be ordered by calling Steve Yankee
Communications at 800-544-4649, or writing to us at 101 Washington,
Suite 230, Grand Haven MI 49417. [Charge your purchase to your Visa
or MasterCard, of course...] Also handy would be Special Report
#SR-22/23V, "How to get money to start or expand your
business." This double-length report ($12) provides a complete,
full-length model of a loan proposal which can be adapted for use
when seeking merchant status. My half-hour audiotape, "10 steps
to make more money through effective marketing" ($10.95) will
detail the simple steps you can start taking immediately to help you
make more money through effective marketing of your products and services.
Steve Yankee is a
full-time business-to-business copywriter and consultant, and the
author of over 50 books, videotapes and special reports dealing with
advertising and video production subjects.