As you look into a new merchant account, the easiest and most logical place to check is your local bank. They have your business checking account, your business credit card, maybe your savings and personal accounts as well. So of course they’re going to give you the best deal available! Well, often times, this isn’t the case. In fact, usually an Independent Sales Organization (ISO) is preferable to your local bank as your merchant account for many reasons.
A little secret that your bank doesn’t want you to know – in all likelihood, they don’t actually process your credit card transactions themselves. Out of the over 45,000 banks in the United States today, less than 1% process credit cards. Instead, they contract your credit card processing out to one of the main merchant account companies. These are the same companies that ISO’s work with! And since ISO’s represent larger groups of people than most banks, they’re able to negotiate rates and acceptance terms with which most banks can’t even begin to compete.
Is your business more than 50% based on the Internet? In the eyes of the banks, this makes your business a greater risk. You don’t have the customer and their card in front of you, so there’s a higher chance that the card information you receive doesn’t match your customer. Many local banks won’t even approve an Internet-based business for a merchant account. If they do, most local banks raise their processing fees at least 0.25% for Internet-based business, and often 0.5% or more. ISO’s, on the other hand, are well-versed in Internet-based businesses and allow more flexibility in rates and acceptance terms.
Are you like many people who have a home-based business? Doesn’t really matter if you’re concentrating on local or Internet sales, you automatically have a black mark against you with the local banks if you work out of your home. Most local banks require that you have a separate entrance to your home for your business; this can’t be an entrance to the garage or backyard, it must be a second entrance facing the street. If you don’t have this, they’ll likely put you on their “Second Tier” rates, meaning you pay 0.5-1.0% more than standard customers. And again, banks are much less likely to approve a home-based account in the first place. ISO’s, however, handle home-based accounts many times every day and know that you’re not a Second Tier business just because you are a home-based business!
If you’re a new or small business, or if your business is considered higher risk by number crunchers, it will likely be very difficult to get your local bank to approve a merchant account for you. Banks don’t like to deal in risk; they prefer to deal in sure things. This leaves many very reputable businesses out in the cold. Some of the business types that banks tend to shun are travel agencies, collection agencies, jewelry stores (especially Internet-based), multi-level marketing companies, and adult businesses. And if your personal or business credit is at all questionable, the chance of a bank approving you for a merchant account is very slim. ISO’s prefer to deal with all kinds of businesses, and many specialize in these higher-risk groups. Since ISO’s are able to go to the merchant account companies in bulk, they’re able to negotiate better deals for even their riskiest customers.
The question that’s always asked about ISO’s: “Are they safe? I’m giving these people who I can’t see in person all sorts of my personal information, it makes me nervous!” The answer is a resounding yes! ISO’s are independent brokers who work with the major merchant account companies to provide you the best rates available. Most are licensed and bonded in order to protect you and your information. They handle hundreds if not thousands of accounts daily, and their customer service associates are some of the best resources out there for information on the optimal way for you to setup your merchant account.
So should you check with your local bank for a merchant account? It could never hurt! However, it’s advisable to have information from several ISO’s ahead of time so that you know just what you’re able to get from people other than your local bank. You’ll likely be amazed at how much of a better deal the ISO’s will offer your business.