There is absolutely no way your business can compete without credit card processing solutions! Industry statistics state that the average credit card sale is $40 versus just $9 for the average cash sale.* Offering a such payment option not only gives your customers alternative methods of payments, but are less expensive to cash and checks. In August of 1997, Coopers & Lybrand noted in a case study that such processing costs an average 2.7% of any transaction, compared to checks 4.0% and cash 4.8%.** These statistics alone should be enough to get any business owner excited about establishing a processing merchant account!
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Credit card laundering, sometimes referred to as "factoring," works like this: A company that does not have a credit card merchant account with a bank or credit card company recruits another company (that does have a merchant account) to process credit card transactions through its account. When the processing merchant receives payment for the credit card charges, it turns the money over to the company that doesn't have an account, but it keeps a previously agreed-upon percentage or other fee. The reasons why some companies need other companies to process their credit card transactions are most often not the "hard luck" stories that the company representatives might tell you. In many cases, these companies need other merchants to process their credit card transactions because investigations and credit checks by banks and/or credit card companies revealed that these companies are bad risks and may end up having excessive charge-backs. Bank Investigations and Regulations Banks and some credit card companies investigate and evaluate businesses before they give them merchant accounts. One reason they do this is to avoid doing business with merchants they consider to be at potentially high risk for incurring losses, excessive charge-backs, or harm to the reputations of the credit card companies and their members. Once an account is opened, regulations provide that a member bank may not accept deposits from any person or entity with which there is no merchant agreement. Therefore, merchants can legally deposit only those drafts generated by their own businesses. If someone approaches you, wanting to process credit card transactions through your merchant account, keep the following in mind: Reasons for being denied a merchant account are not as simple as being a certain "type" of business that prevents the company from being approved for a merchant account. Instead, it may be because a bank or credit card company concluded, based on its investigation and credit check, that a particular business is a bad risk. Yes, banks may want information and financial records. Obtaining this information is not an invasion of privacy; rather, it enables them to evaluate the company in order to protect itself, consumers, and you from risky companies. Likewise, if a bank ever asks for a large opening balance before granting a merchant account, it is because the bank determined, based on its investigation, that the company poses a financial risk.
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