Third-party merchant account providers handle your credit card transactions for you in return for a commission, essentially a share of your profits. Account setup is often free, although some companies may charge a one-time, up front fee. These third-party processors are mainly used in Internet businesses, although some provide broader functionality.
Once you have been approved and paid any required up front fees, you create “order links” for the items you are selling. These links will take customers to the third-party processor’s website, and they handle the orders for you. Credit cards, debit cards, gift cards and online checks are the most common payment options supported by third-party processors. Some may offer a telephone order capability, as well.
When your customer makes a purchase, the sale amount is credited to
you, less the processor’s commission. The processors usually pay at
regular intervals, according to the contract you sign and the included
Third-party processors appeal to startup businesses in particular, because besides the setup fee, you are only charged when a sale is made. You’re not charged anything but commission on completed sales.
Making It Work
When your processor notifies you that your account has been frozen or suspended, it can come as a real shock. To prevent any surprises, it is extremely important for you to familiarize yourself with the terms of your contract. Complying with their set regulations and guidelines will help to maintain your account and keep it in good standing. This way, you won’t have any issues and the sales will keep being processed.
The factors leading to account suspension are much the same as those that would result in problems with a direct merchant account of your own. You have to maintain good business practices, defend against fraud, provide good customer service to resolve problems without refunds and so forth. The main reasons your third-party account would be suspended are:
- Too many chargebacks
- Inadequate response to customer service requests
- A long history of unresolved returns or complaints
- Giving false information about the products you sell
- Giving false information about your business in the application process
- Selling items that are faulty or damaged
- Using a customer’s credit card without their knowledge, or any other fraudulent actions
To guard yourself against unnecessary issues and the hassle of disturbing your daily business, it may help to have leads on other third-party credit card providers. You may be able to open another account with a different provider while your issue is being resolved with the first provider. However, this is only a viable option if you are an honest business person, since any manipulations or attempts to circumvent established procedures will be noted on your account and may become part of your business history.
Here are some things to remember:
- Keep excellent records, and clear, balanced books. Use a separate, business-only bank account to deposit funds from sales and manage the account wisely.
- Make sure to provide all your customers with full details on how to contact you directly. If they call you and leave a message, return it. You don’t want to delay the process for the customer and cause them any aggravation. That could lead to chargebacks and returns.
- Have your own anti-fraud measures clearly worked out and implemented, starting with a check of the buyer’s e-mail address. The use of free “throwaway” email accounts (Hotmail, Gmail, Yahoo) is continuously growing and these are the types of email accounts that are regularly used to commit fraud.
- Double-check that you are shipping an order to the same address as the billing address registered to the customer’s credit card, or another authorized address. If you aren’t sure, check and check again. Many cases of fraud use alternative addresses to get hold of goods without the original credit card holder’s knowledge.
- Exclude delivery to high-risk countries. You can get this information from your credit card company. Consider implementing a pull-down menu with a full list of countries eligible for delivery of your goods, or otherwise advising customers of these limitations, and the reasons for them.
Chargebacks and Refunds
As mentioned briefly above, one of the main areas to focus on is preventing chargebacks. A chargeback occurs when a customer contacts their credit card issuing company directly for refund of a payment or purchase. In short order, this being the computer age, this cost will be charged back to you and you may be subject to additional fees in accordance with your contract. Too many chargebacks and returns is an easy way to lose your third-party merchant account.
In summary, the main thing to remember is that all of these hassles and problems can be avoided. It’s all a matter of following the rules and guidelines that were implemented at the time of your agreement. Do all these things, pay attention to details and there most likely won’t be a need to worry about suspension of your account.