Avoiding a Merchant Account Scam
Learn How to Protect Your Business
When launching an e-commerce business, you’ll need a merchant account in order to process credit card transactions through your website.
Like many things in business, however, some merchant account options sound too good to be true. Merchant account scams are designed to fool merchants into spending money on a faulty or nonexistent product.
If you’re looking for an honest, affordable merchant account provider, make sure you avoid the types of services below.
1. Free Merchant Accounts: Proceed With Caution
There is no such thing.
While a free merchant account looks tempting, it is undoubtedly a ploy to get you to list your financial information quickly, and is a common merchant account scam found online. Through clever verbiage and other scam tactics, they lure business owners to register for their services (usually through a startup fee that they claim is refundable), and they’ll simply take the money and run.
Other times, a questionable payment processor may advertise free merchant accounts, then attempt to hit you with various fees from ‘outside’ sources.
With Instabill, we hide nothing, and we don’t charge fees unless we can get your business approved by our acquiring banking partner. We’ll explain our competitive fee structure over the phone as it is also listed in the merchant account contract we’ll send over to you. Merchant account fees can vary according to details such as industry type, processing history, target market and/or location of your business, among others.
2. Watch out for identity theft
A merchant’s identity can be stolen through a merchant account scam. As opposed to the free merchant account scams, these websites might offer a product that seems legitimate with industry jargon and seemingly factual statistics to encourage you to apply. They won’t ask for money upfront, because money isn’t what they’re after—they want your personal information.
- Never share your personal information with persons you don’t know or trust. If said provider seems anxious to get your personal details, this is a red flag of a merchant services scam.
- Make certain merchant account providers are properly accredited and recommended by past users. References are a must.
- A legitimate merchant account provider should have the resources to tell you within 10 minutes whether they can provide an acquiring bank approval for your business.
Our merchant account managers’ first course of action is a telephone conversation, to see if Instabill and an online business can work together. We’ll ask a few more questions about a merchant’s processing history, country of business, preferred currency and/or chargeback rates before we make the decision to proceed to the application process.
It is only then that we’ll ask for your sensitive personal details.
3. General things to watch our for
Characteristics unique to a possible merchant service scam include:
- Minimum prices: In the merchant services business, merchants get what they pay for. Each merchant account is unique to many variables.
- Hidden fees: Usually the first questions we receive are regarding fees. A provider should be able to list each one.
- Cash rewards: Cash rewards are common sign-up incentive, usually with the provider is hopeful of making the money back through a long processing relationship.
- 24 hour support: Advertising 24-hour support usually means that a provider is using a call center — not merchant services professionals.
- No setup fees: Merchant account providers are known to waive setup fees occasionally, certainly not for every merchant who signs on.
- Immediate approvals: This is a common incentive. Truthfully, approvals usually take between five days and two weeks. Each acquiring bank is unique.
- Various free services: Offering free services, such as payment gateway use, is something that should be questioned by the prospective merchant.
We’re not suggesting that all or some of the above traits are not feasible. When presented with such perks, it is always advisable for a merchant to question how the merchant account provider can offer such, yet remain in business. It is usually worth further investigating.
More on merchant accounts with Instabill
As the saying goes, if it seems too good to be true, it probably is. A merchant account scam is designed to be appealing to new merchants and startups, especially high risk merchants.
If you’re in need of an affordable credit card processing solution for your business, Instabill has specialized in providing high risk merchant accounts to e-commerce businesses since 2001, and can help you find a solution that’s perfect for you. Contact us today to learn more.