A while ago I wrote a piece about free merchant account and merchant services like Paypal, and some of the practices that are, in my opinion, a loophole to gain access to your bank account without your permission. Well, it's more commonplace than you realize. After an extensive 4-month study of four of the major free merchant account and merchant services providers what I found is pretty shocking... Should You Be Worried About Your Money? Quite frankly, if you're using a third party merchant account or a free merchant services provider, the answer is yes; at least be cautious and keep a close eye on them and your bank account. When it comes to making money, whether you do it from blogging or not, it is important to understand that where you keep your money and the risks involved is just as important. And if you're not careful, all of the money that you have worked hard to get, can be gone before you know it. Here are some of the things to consider: 1. What are the discount rates on transactions? 2. Will your provider back you when it comes to chargebacks? 3. Is your provider is a real bank and not just another third party provider? 4. How long after the sale is the wait period before you receive your funds? 5. Can your provider freeze or hold your money, even without any warning? 6. Is your money protected by Federal Banking Regulations? 7. Can your provider take money from your account without notice or warning? 8. Were you sold the right plan for your needs? 9. What are the restrictions before your funds are available? 10. What penalties are there for inactivity or dormant accounts? There are a lot more important things to consider but the above questions are very serious considerations. During this study, including research and public feedback, I've found some very surprising results that you should be aware of. Just to clarify, this study covered four free merchant account and merchant services providers, ( PayPal, Google Checkout, ClickBank and AlertPay). To their credit, all of the above have excellent identity verification processes. The one bad note is AlertPay who has failed to complete the verification process since this study started back in September of last year. To this very day, despite several attempts to contact their customer service department, (without success), they still have my account on hold "awaiting verification." Here are two screenshots. The first is the welcome email when I created the account as part of the study, and the second is the login screenshot four months later. Welcome email from 09/07/2009 http://www.techdex.net/coaching/dl/alertpay1.jpg Login screenshot taken 01/18/2010 http://www.techdex.net/coaching/dl/alertpay2.jpg The impression it left on me is that it's quite obvious they don't want, nor care about me or my business, and I have no qualms in voicing my opinion. I highly recommend that no one should be subjected to this type of abuse and unreasonable waiting. Don't do business with AlertPay unless you like being on hold and not being able to make payments, request money, deposit or withdraw funds, or (and they say this in print on the screenshot.) - close your account! So what about the others? How did they measure up when matched up against paid services? All of them had several complaints about money being stolen, unwarranted funds being taken from their accounts, siding with the purchaser for chargebacks, and losing both money and products/services. As part of the study I personally verified dozens of complaints regarding each provider and learned that many cases have persisted weeks, and even months with no resolution. During my research I took the liberty to become an avid policy and agreement reader and consulted a lawyer to help chop through the legal jargon that stumped even me, an educated business owner of several years now. Read The Fine Print Twice And Often! The best advice I can give to anyone is read the fine print and keep checking back often to make sure it hasn't been changed without your notice. I mean, surely if there is a change in policy you would be notified, especially when you consider that it's your money, right? I learned that it's not necessarily so. This excerpt was taken from one of the service agreements. I've removed the company name and other information. "You agree that [company] may provide notice to you by posting it on our website, emailing it to the email address listed in your Account, or mailing it to the street address listed in your Account. Such notice shall be considered to be received by you within 24 hours of the time it is posted to our website or email to you unless we receive notice that the email was not delivered. If the notice is sent by mail, we will consider it to have been received by you three Business Days after it is sent. You may request a paper copy of any legally required disclosures and you may terminate your consent to receive required disclosures through electronic communications by contacting [company] as described in section [xxx] below. [company] will charge you a Records Request Fee (per section [xxx]) to provide a paper copy. [company] reserves the right to close your Account if you withdraw your consent to receive electronic communications." Bottom line? If you didn't receive any contact or if you didn't take the time to read up on any changes, then you're out of luck and you're still liable to follow the changes even if you didn't read or understand them. Unreasonable Requirements to withholding Your Money. Even more shocking, I found that all of them, (in one way or another) have very unreasonable requirements before your money is available to you. Here are a few excepts taken from agreements. "Customer Distribution Requirement [company] accounts cannot be used for the sole purpose of collecting rebates or otherwise extending credit to yourself or others. In compliance with US law, [company] will withhold payment of any account balance until the following criteria is met: a. Sales made with 5 or more different credit card numbers and b. Sales made with two different payment methods (either Visa, MasterCard, or PayPal). Note: PayPal purchases do not count toward the minimum 5 different credit card numbers. Dormant Accounts Accounts with a positive balance but no earnings for an extended period of time are considered dormant. Dormant accounts are subject to a charge of $1 per pay period after 90 days of inactivity, $5 per pay period after 180 days of inactivity, and $15 per pay period after 365 days of inactivity." I have even found clauses where you have to make over a certain amount of money before you have access to it. Instead of listing dozens of excerpts here, let me summarize some of the outlandish stipulations, and keep in mind that it is your money that they are holding. Unreasonable Stipulations: I have found stipulations that allow free merchant account and merchant services to... 1. Ask for ANY information from you to verify your account, including your social security number and checking your credit report. 2. Do just about anything with your credit card and banking information to reimburse themselves when you loose a claim or face a chargeback (read the next one). 3. Determine if a chargeback is valid. Isn't that your credit card company's job? 4. Take money from your other accounts, (if you have more than one) to satisfy the negative balance on another (including fees). 5. Use the liability statement to recover money, (quoted) "by any means necessary." 6. Penalties for not making sales! (See above excerpt). 7. Set limits and restrictions before you have access to your money. From the feedback that I've received, many find it disturbing that free merchant account and merchant services providers can penalize you and place restrictions, and in the case of one of the clauses, charge you because you don't make them more money from interest or money market investments, (or both). Even worse are restrictions on eBay transactions. Why are they so popular and are they really free as they claim? After speaking with several people, the availablity of these services to people who don't have the money for a paid service is the draw and, as long as you don't do considerable amounts of transactions and stay in the clear of the restrictions and meet the requirements, the fees aren't too bad. But are they really free? In an ironic twist, these company's place your money into real bank accounts where they earn interest and in some cases, earn money market and investment dividends, (provided that you opt in to allow them to do that). Personally, during this study I have watched month after month, how much money I've lost between the transaction fees, disputes and claims (even ones that I've won), other types of fees and Free isn't always free - my costs are steadily climbing. Here are some intersting statistics that will reflect on my taxes this year. In September when I opened the different accounts, I was paying an average of 3 + .30 cents and reduces it to 2.5% if you do more than three thousand dollars monthly. December last year was an interesting month. One of the products I sold had a defect in the programming and it led to me issuing refunds, and, because I had a few customers initiate the complaints, it led to a few chargebacks. For the month of December I paid nearly a hundred dollars through PayPal and almost the same though the other accounts that I set up, not including related fees. When I considered that I keep less than 70 cents per dollar to begin with in transaction fees, paying an additional hundred dollars on top of that, (again, not including the incurred fees), it was actually costing me more money to use the free merchant services than to just pay for a real merchant account, despite the draw of no monthly fees to maintain accounts, no setup or gateway fees, etc. With exception of course to AlertPay, which to this day still has my account awaiting verification, (four months now and counting). Solemn Advice and a Silver Lining: When it comes to merchant account and merchant services providers, the advice is still the same. Read, Read, Read the agreements and fine print, and keep checking back often and monitor all of your account activities. - Higher transaction rates mean that you loose money; - Excessive fees and liability mean that you loose money; - A provider that works against you you in claims or chargebacks instead of fighting for you means you can't trust the company you're with; - Ridiculous stipulations means you can't do anything about it if and when they do take money from your account; - No FDIC (because they aren't real banks and don't have federal protection), means that you could loose every penny and have no recourse to recover your losses. When you get right down to it, if you have a business or do any kind of online transacting, these services are simply not a wise choice. Certainly they have convenience that allows you to set accepting payments with no cost up front, but when you do start making money, it is a wise choice to drop them for a real bank with a real merchant account and either drop them completely or use them as a secondary option to accept payments. Is There A Better Option? I'm not going to leave you with all of that information without providing a silver lining and a very affordable and reasonable option, and there is. I've also had to consider several paid services as well, and one stands out as superior in my opinion. And now that you know just how serious the risks are and the options you have to weigh, I will add another recommendation, (also based on my experience). During the different phases of being a business owner over the past seven years, I've had three merchant accounts from different banks including Bank of America, Wachovia (before and after the merger with First Union). When the merger came with Wells Fargo I decided to drop them all together for my own reasons which I will save for another post. Long story short, of all the merchant services providers I tried, this one passed my expectations. Some of the benefits include: - Lower transaction rates! - A dedicated department to fight for you in disputes and chargebacks. If you're like me and have faced customers buying a product and lying so they can get refunds, I call that built in fraud protection. - A real bank that comes without the insane third party stipulations, regulations and restrictions! - And it is a real merchant account I especially like that there is considerably less wait to receive your money, (seldom more than 1 or 2 business days), and since they are a bank, they are FDIC insured, which means that if anything happens? Your money is protect by Federal Banking Regulations and you don't loose your money! And what I like is that they are an A+ accredited business of the Better Business Bureau which is the best possible rating. In fact, they are so good that I found a top 10 review that I feel obliged to share. http://www.youtube.com/watch?v=HD0RJzGWBLY&feature=player_embedded I also was directed to a customer service video that explained how I felt dealing with the customer service from those other services. http://www.youtube.com/watch?v=Re-sE7jwPqg&feature=player_embedded Putting My Money Where My Mouth Is: I'll tell you more about that service in a moment but first, I have to say that the last few months have been a roller coaster and the whole study has cost me a lot of money both out of pocket and in lost profits. There are a lot of articles giving sound advice but very few people will ever risk their own money to deliver solid, experience-based and valuable information in order to help someone else. Was it worth it? If the information provided here saves you a penny (which I know it will save you much more), then the answer is yes. Even more than my own personal cost, I've been speaking with one of the directors of the service in those videos and we've set up a FREE demo for you to try out, but here's the thing. I don't want you to just try it out... I want your feedback as well. I already have a lot of testimonials, but I want to hear from you. There is nothing I like more than getting to know and hear from the people that I help. Take it for a FREE test drive! As I've said, I've set up a free demo for you to try out for yourself. http://echomerchant.evsholdingco.com/ The services they offer include: - Credit Processing - Debit Processing - EBT Processing - Check Services - E-Commerce - Gift & Loyalty Cards - Online Reporting - ACH Processing - Equipment Leasing - ATMs - Merchant Cash Advances - Remote Deposit Capture - Accept payments from iPhone App and iPod Touch In the words of one of their directors, We Will Not Be Undersold. Quote - "When I say "we will not be undersold," I mean in terms of the fees for the software and merchant account. We want to make it easy for our merchants. We are month-to-month on eCommerce merchant accounts and we even have a 30 day money back guarantee. We can get merchants approved within 24 hours." Follow the link to try the free demo: http://echomerchant.evsholdingco.com/ Resources: 1. Agreements and EULA's taken from the four studied companies. - http://checkout.google.com - http://www.paypal.com - http://www.alertpay.com - http://www.clickbank.com 2. Legal consultation from http://www.lawguru.com 3. Statistical data from http://merchantripoff.com Dexter Nelson TechDex Development & Solutions
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