Online Merchant Accounts – Review of Merchant Inc

This review is long due of a company called Merchant Inc.

Let me start by explaining what my circumstances were.

As an owner of an online company, we live and breathe by the ability to accept credit card payments for customers.  For the 14+ years we have been in business, we have used PayPal for all of our transaction needs.  It is relatively easy for our customers to get their invoice by e-mail – then go to the PayPal page to either login to their account – or put in their card details.

As of this writing, PayPal’s fees are approximately 30 cents plus 2.9% per transaction.  Not bad considering there are NO OTHER FEES – no monthly fees, no batch fees, nothing.  Merchant accounts have all kinds of other fees – as described below.

Well, I had a customer put in a charge back against me.  This customer was a fraudulent scammer to say the least – as they paid us to create two websites for them.  We created the websites, they approved of both of them, and then decided to call their credit card company and say that our charges were not authorized.  This was the first time I ever had to deal with this in my business and was shocked.

So PayPal had no other choice than to take the funds from our account.  Any merchant account would do this as well.  So I got online – like anyone else would – and started seeing how it was to deal with PayPal and working to provide my side of the story.  PayPal does have a nice system where you can go in and upload and provide all of the documentation regarding the claim.  However, based on a lot of reviews I was reading, everyone was indicating that PayPal would do absolutely nothing regarding these charge backs and wouldn’t fight on their customer’s behalf (completely false after I won the case).  Long story short – after a couple of months, PayPal did go to bat for me – and I got 100% of the chargeback funds back in my account after the decision was overturned.

In the meantime, I went to a website – PayPalSucks.com – and started reading all kinds of people’s reviews on there as well.  I felt like I was going to just lose the funds and all the time that I put into the customer’s websites.

Well, the PayPalSucks.com website really touts a company called Merchant Inc as a payment alternative to PayPal.  They were the only provider that PayPalSucks.com would recommend for US customers.

One of the first things I did was to post a topic on the PayPalSucks.com website asking others about their experiences and reading Merchant Inc reviews.  I also posted a huge review of Merchant Inc on there as well.  Well – my post was NEVER approved and never posted to the site.  Imagine that.  So what I thought is probably true – the same company/person that created the PayPalSucks.com website most likely runs Merchant Inc as well.  That is why they have banners and advertisements all over the site for Merchant Inc – and is why that is the only provider they recommend for US customers.

So – now for the review of Merchant Inc.

Customer Service

Very responsive chat-based customer service that I was very happy with.  Do note that there are three different customer service departments that you will deal with though – which is noted below.  The one time using iPayment’s customer service seemed OK – and the one time using Authorize.net’s customer service also seemed OK – although it took their department 4-5 days to get my logo uploaded to my payment form.

In about 24 hours, I got the approval.  This whole thing with a merchant account can be very perplexing.

How Many Hands in the Pot?

#1 – You have Merchant Inc themselves.  They basically are a reseller for Authorize.net.

#2 – You have Authorize.net.  They are the front-end that the customers and visitors see when making payments.  They are the payment gateway that ties Internet payments with an actual credit card processor.

#3 – You have iPayment.  I’ve read some VERY nasty things about iPayment that definitely scared me.  iPayment is the actual processor that talks with the card networks and does the deposits into your account when someone pays.

That is how the whole system works.  This makes matters that much more confusing with so many different hands in the pot.

Fees

Well, this is the part where you need to read the fine print.  On the Merchant Inc website, everything looks very nice and the prices reasonable.

$7.95 a month
1.9% plus 25 cents per transaction

Looks good doesn’t it?  I absolutely thought so when comparing them to the cost of the prices listed on Authorize.net ($20 per month, $99 setup fee, 10 cent transaction fee).  I thought hey – all I have to do is about $800 a month in sales and I’ll break even with what I was paying with PayPal (since their fee is about 1% less – 1% of $800 is $8.00).

So, got all signed up and was happy after I programmed my site to interface with the Authorize.net sandbox/developer stuff and it worked perfect.

I then started doing some research because I wasn’t sure what iPayment was all about.  Well, turns out, there are some very unhappy iPayment customers – where they noted that iPayment was taking high fees from their checking accounts, blocking funds, and other stuff – you know, stuff that PayPal does (supposedly).  Several others also noted that iPayment requires a “reserve” account in case of charge backs or other issues.  Some people noted that their “reserve” account was $10,000+ that they had no access to.

The Fine Print

Very concerned, I started a chat with the Merchant Inc folks.  They told me that the only fees there were are what is shown on the application.  Sure enough, I noticed a $2.50 per month reserve account fee.  The person I spoke with said that I do not have a reserve account, and therefore that charge was not applicable.  In the end, I wasn’t charged that and didn’t have a reserve account so that was positive.

Next was a “batch” fee.  What is this?  This fee is incurred any time that you have a payment submitted to you.  As I was told, this is only incurred when payments are accepted – not declined and this fee is daily when there are transactions.  So, if you get a payment every day of the month, you are looking at an EXTRA $7.00 to $7.75 A MONTH.

Next – and this was only uncovered in the fine print.

iPayment apparently has to verify your “business entity”.  So, there is a one-time $25 charge for that which is done in the first 30 days.  This certainly wasn’t clearly stated – and didn’t expect that.  What are they going to verify?  Nothing if you ask me – I bet it is just a fee for them to pocket.

And lastly – there is an IRS fee EVERY MONTH.  Again, noted only in the fine print.  Cost is another $4.95 a month.  For what?  I guess so they can report to the IRS monthly what is brought into the merchant account?  Who knows – but that works out to another $59.40 every year.  Sure, I guess sending information to the IRS so you pay your fair share of taxes is needed – but another $60 a year is ridiculous.  You would think a processor would be able to mass print reports at the end of the year and mail them out.  Heck, everything is probably sent electronically so there isn’t any manpower needed or postage.  I’m sure they do – but they are then charging another $60 to do it.

Lastly, don’t forget about the PCI Compliance fee which is yearly.  That is $160 a year.  If you do not certify as PCI Compliant, you are whipped with another $30 A MONTH charge until you get compliant.  I used the CIM – hosted-form solution at Authorize.net so I didn’t take any credit card data on my site.  In those cases, there shouldn’t even be a fee (PayPal doesn’t charge for that).

So, when it is all said and done, Merchant Inc. is much more expensive than one may think.

Let’s put this down into real terms for comparison here

Costs for Merchant Inc.

– No Setup or Application Fee
– BUT there is a $25 charge to verify your ‘business entity’ and charged within 30 days
– 1.9% per transaction plus 25 cents plus 2 cents for an acquirer fee
– 25 cents DAILY for days with successful payments
– $7.95 per month – $6.95 a month goes to Authorize.net and the $1.00 goes to Merchant Inc (I guess? – they call it a $1 a month billing charge)
– $4.95 per month – for regulation charges
– $160 per YEAR for PCI Compliance
– $30 per month if not PCI Compliant

There might be others that I didn’t uncover – but this is what was in the application itself.

Let’s say you have 20 days of payments each month.

Approximate Total MONTHLY Cost:  $17.90 before PCI Compliance, $31.23 with PCI Compliance (doesn’t include the per-transaction fees).

Qualified Versus Unqualified Rates

Another “got ya!” moment is the rate that Merchant Inc quotes on their site.  They quote 1.9% per transaction. No asterisk or star next to that number with a disclosure – so that means you should be charged 1.9%.  But be prepared.  That is NOT the case the majority of the time.  If your customers are using business cards, reward cards, or American Express, be prepared!  That 1.9% can quickly turn into 3.5% or higher.  That alone is higher than PayPal’s fees.  During my time with Merchant Inc, about 75% of my transactions were not getting the qualified rate.  Why?  Because most of our customers are businesses.  So immediately, this rate is higher than PayPal and the cost can be higher.

Costs for PayPal:

– 2.9% plus 30 cents
– Inability to directly fight claims – must use their department to act as a liasons (but this worked out well and I won my case)
– PayPal calls the shots and can block/suspend your account whenever

So if shopping around, PayPal absolutely looks like the better alternative than a merchant account if you don’t do more than $3,000 or so per month in transactions AND you manage to get the qualified rate of 1.9% per transaction.

Hopefully this review of Merchant Inc will be helpful to those doing a search for it.  Be aware that the PayPalSucks.com website is definitely loaded with false information and their forum appears to be run by the website owner – and they appear to only post negative topics about PayPal with nothing positive to say.  They do this so you are in the mindset of leaving PayPal and going to Merchant Inc.

We had our Merchant Inc account for about four months before cancelling.  Once our PayPal claim was overturned, shortly afterwards is when we discontinued the account at Merchant Inc.  We didn’t have any reason to continue paying for it.  We also ensured to cancel before we got hit with the PCI Security Compliance fee – which is done around May of each year.

In the end, there was one month out of four where we actually saved money using Merchant Inc – but it was less than a $5 savings.  All of the other months – because of the high non-qualified rates, batch fees, and all of the other fees involved – ended up costing us quite a bit higher than PayPal.

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