All about Credit Card Processing and Merchant Accounts

I work for a credit card processing company so I know a few things about merchant accounts. The following applies to a full-fledged merchant processing account where you are not using a third party processing system like paypal. The following is what you should look for when setting one up for a website:

Look for a processing rate of somewhere between 2.00% and 2.30%. The closer to 2.00% the better. Some processors will tell you they can give you 1.50% or something like that. It’s Bull$h!t. Internet based sites can never be under 2.00%. Ever. Ever. Ever. It’s simply not possible.

There is usually a transaction fee to go along with each tranactions. This can be anywhere from 10 cents to 50 cents. The closer to 10 cents the better. For Internet accounts this will usually be around 20 cents - 30 cents. If you don’t see a transaction advertised, they are either hiding it or “blended” it with the percentage rate.

Processing usually entails a recurring monthly fee, usually called a statement fee. This can be from $5 to $25. $10 being average. There is always one. If not, they are getting that money from you in another way without disclosing it. (If you have verifiable proof that your monthly volume will be high, high being $50k a month, it is possible to have this waived but is still not likely).

Monthly minimums: The easiest way to get ripped off. Basically, if you don’t process enough, they’re going to wack you with a big fee. This can range anywhere from $10 a month to $25. $25 being average. If you expect to be low volume (under $2000 per month) this is a huge point to be explored. It can sometimes be waived so always ask about it!

Funds should be deposited into your account within 3 days or less. If the processor won’t do that, they’re holding your money so they can make interest. That’s not in your best interest, however. If you can’t get your money quickly, don’t even consider using that processor. There’s no good reason to hold the money that long. None. Zero. Zip.

Here are fees you should never pay:

  • application fee
  • minimum fee
  • set up fee
  • reprogramming fee
  • annual fee
  • membership fee
  • watts fee

Why not pay these fees? Because the processor is getting a small percentage of your sales and all they have to do to get your money is sit on the a$$es. There’s no reason to give them large fees like the above for doing even less then that.

American Express: For Internet merchant’s their program is simple. You pay 3.5% for every sale on their card. Cut and dry. Nobody but American Express can control these rates. If someone tells you they can “hook you up” or give you a special rate, they are flat out lying to you.

Discover Card: Their rate varies depending on your average ticket. If your average ticket size is small you’ll be looking at a rate around 3%. If your average ticket is higher (over $150) you’ll be closer to 2%. You’ll also have a transaction fee of 10 cents. Nobody but Discover Card can control these rates. If someone tells you they can “hook you up” or give you a special rate, they are flat out lying to you.

When opening a new account, you will usually be asked to sign a contract for a length of time. If you try to cancel your account within this time you have to pay a cancellation fee. It is extremely rare for a processor to not have one. I actually don’t know of any who can waive this. Make sure you ask about this. You can be locked in a contract that automatically renews itself! And the fees can be as high as $800 just to get out. And if you think you can just not pay them, read about THE MATCH FILE below.

You will need to open a business checking account with your local bank. You should never be charged by the processor or your bank to have your funds deposited into it. If you are, get a new bank or processor.

The processor will do a credit check on you. This shouldn’t have much of an effect on anything unless you have an open bancruptcy or extremely derogatory credit. There are some picky processing banks out there but there are some who’ll take anyone. (We’ve gotten some unbelieveable accounts open at my day job).

Set up should never take more then two weeks and can be done in less then 24 hours at times. If someone is taking more then 10 days to get an account open, tell them thanks but no thanks. The odds are they’re having problems and are feeding you BS.’s price comparison is close to accurate but a little blurred. BEWARE! There are some real scumbags who prey on new merchants who have no clue about all of this. You could be slammed and left for dead before you ever even take an sale.

THE MATCH FILE (also known as the Terminated Merchant File) is the black list of credit card processing. If you get on it you can never accept Visa and MasterCard again. How do you get on it? If you owe a processor money, even just $5, they can place you on it. You can also get on it if you have too many chargebacks. If more then 2% of your credit card sales are charged back your account is closed, your funds are held, and you are added to the match file. Fraud will also get you to the match file. The last two scenarios are permanent and you’re just screwed. If you are placed on the match file because you owe a processor money, you can get off the list by paying off your debt. FYI: when you are added to the match file, they also add your address so you’re family is screwed, your business name, and business address.

One company to stay away from is Card Service International. You actually would most likely be dealing with their agents as opposed to the company directly. We get calls every week from merchants being screwed by a representative of theirs. Their rates and programs are horrible.

One place you may think is a good place to go is your local bank. Believe it or not it’s not true. They actually just resell the services of other companies. The result is they are not very knowledgeable about what they are doing and their rates aren’t very competitive. You may think it’s nice and safe to be dealing with your local bank but in credit card processing nobody is local. Once your account is set up you then have to deal directly with the processing bank that owns your account and your local bank is no longer in the picture. They literally can’t do jack for you. You’ll be just like every other merchant; you’ll need to call a toll-free number for support.

Shop around! There are a ton of businesses that offer merchant accounts. Find the one that suits you best and then reap the rewards of accepting credit cards.

A brilliant post. many thanks.

Great advice but just like all companies, they have their problems. I personally know the founder of Cardservice so I have to put in my 2 cents here. I am also a reseller for them. So I have to take a little offense that I am classified as someone who might screw over a new merchant. That is so far from the truth. I do not know many of the VIPs over there since Burtzloff sold the remaining part to First Data, but I know enough. Actually the CFO that was there works for me now in another company.

Sure there are people out there that will tell you things to get your business. When I joined the military, I told him that I wanted to join & do not sell me anything. Well he did lie to me - he told me that if I had my hair cut short enough, they would not cut my hair. Needless to say, they shave your hair down.

And on one last night, it is possible to get a rate lower than 2% on the internet IF your volume is very large. I have a customer who is on that now.

And yes, I could sit here & tell you a lot more, I have consulted with a lot of the other corporations because of one of my other companies. I have seen the horror stories.

But other than that, great advice.

Great post Stymiee, lots of good info.

By the way, can you comment on the services and pricing of Echo-Inc?


As a comparison, with PayPal:

No set up fee, no monthly minimum, no statement fee.
2.2-2.9% + $0.30, including American Express and Discover
Instant access to funds with debit/ATM card
No application process

Actually there is really no comparison with a full-fledge merchant account & a third party processor. There are so many differences. You can download a comparison chart here:


What exactly would you like to know about ECHO?

Regarding pricing…

Usually 2.61% for the discount rate, however it can be lower if you are a high volume merchant
$0.30 cents per transaction
$19.95/month (charged only on months you process transactions)
Flat $0.60 cents per check processed (if you want to take checks online)

You can get the $10 monthly fee instead of $19.95 if you go through an ECHO affiliate, however you give up the detailed transaction reporting features and no access to the secure payment form hosted on

ECHO does have a rather strict underwriting department. But if you’re interested and have an application I’d be happy to go over it with you. Since I work for ECHO, I know what the underwriters look for and we can avoid any snags.

Let me know if I can be of any further help.


Jim Conley II

Hi Jim,

Thanks for the offer. My web development firm is starting to take on some e-commerce sites and as such I am new to the world of merchant accounts and payments processors.

I have read that Echo is both cheap and has lots to offer. Since there are many merchant accounts to choose from, I was basically looking for an informed opinion on its services and pricing.

I know that in the near future some of my prospects are going to ask me for suggestions on who to use, so I’m looking to educate myself in this area.

Thanks again,

You should become a reseller. You would get a great buy rate and can make money from your customers’ processing. It’s easy to do. Maybe I should start a thread about that?

Becoming a reseller is a great idea and I would be interested in the thread as well.


I’ll type something up and post it this weekend. If anyone wants something in particular covered, let me know.

The biggest problem ( for me at any rate :slight_smile: ) is that there are so many different options. Paypal, others like paysystems, real merchant accounts… monthly payments, percentages, transaction payments… the more you read the more you get bogged down in it all… Very confusing.


I would like to know which companies are the good guys and which companies I should avoid.


Mark, everyone has a horror story about every company. Some more than others & depending on the industry you are in, maybe more so. I also think that maybe why you will hear some re: paypal is because they have a very high client base. And maybe that is the case with CSI as well. The more clients you have - your chances will increase with with horror stories.

I do not beleive in bad mouthing any company. It is just not right. I will say what to do if you want to use a certain company. But to flat out say not to use someone because their business plan is different than most other companies is just not right.

You first need to decide which is right for you - a merchant account or a third party processing your money. And then make your determination. I actually have a client who uses us a back up when his main processor goes down. He usually processes about $2,000 in that one a month (more if there are problems). But he had a lot of problems with the agent that tried to set him up with an account. When he found out that I could, he told me to go for it & see what I could do. I had him set up in less than 24 hours accepting Visa/Mastercard. He was surprised that I could do something that the other person could not do. Most of the time, once they get your money, there is no more support. But since we are not charging any application fees there is no money for us to get. :slight_smile:

Very true. The greatest single factor when signing up for a merchant account is the agent who signs you up. If they’re cool, it can be a simple and good experience. If they’re less then honest, it can be a nightmare.

Hi stymiee, I really appreciate your post of advice and truly a big thanks to you. I’ll be right on your next thread regarding reseller account.

Take care. :slight_smile:

hey Corey -

i noticed the guy’s page you refer to for the Merchant Account Comparison spreadsheet uses PayPal to accept donations… no greater testimonial in my book :wink:

btw: that spreadsheet only has the standard PayPal 2.9% rate – i emailed Derek and asked him to update to include the 2.2% PayPal merchant rate that’s available if you’re doing higher volume levels.

for more on PayPal fees, check here:

one other option people may want to consider who are already using a traditional merchant account – you might still want to offer a PayPal payment mark to accept PayPal payments as sort of a 5th credit card, even if you keep using your existing merchant account to process Visa/MC/Amex/Discover payments.

there are about 35M registered PayPal accounts out there, and like Amex and Discover it’s becoming widely accepted as just another payment method. in addition for those folks who already have a PayPal account, their checkout experience may even be faster since they’ve already registered.

anyway, just another option… some people don’t realize you can use PayPal as both a processor and as a payment method.

I would be glad if one can help to post some which are preferred or widely use by people around?

I have to agree with the poster on CardService. We are with them now, they have by far the worst Customer Support I have ever seen. It’s not even close. They take debit money out of your bank account and when you call to ask about it, they don’t know what you are talking about. They are never there to pick up the phone. They hang up on you when they get fustrated. I can go on and on, but please stay away.

aieoncfo - let me know who you speak to over there. I know all the supervisors & the execs. Plus what charges did you have a question about? Did you also check the MMO site?