Online Merchant Account Pitfalls
by Bobette Kyle

1. Open a merchant account for myself and
2. research options for my new ecommerce Web site solutions information section of websitemarketingplan.com

After some research, I thought I'd found an attractive online merchant account offered through a reputable reseller. I learned the hard way about a pitfall I hadn't anticipated.

My Online Merchant Account Experience

I found what looked to be a competitive Merchant Account offered through a program at a popular reseller. Fees were summarized on the reseller's site and applying was simple. I paid an $89 set-up fee, which took me to an online application I was required to submit to get the process going.

That's when things got interesting. Submitting an application meant agreeing to a previously undisclosed 45 page merchant agreement. An unmentioned termination fee was buried on page 11.

If I ever cancelled the account, I'd be hit with a $295 termination fee. I knew from my research that the large termination fee was not competitive with other merchant accounts and other aspects of the account were not attractive enough to compensate.

Suddenly, this merchant account was not such a good deal.

More critically, however, the termination fee was not disclosed before I was required to pay for set-up. I immediately asked for a refund.

Non-Refundable

Then things got even more interesting. I was told the $89 fee was non-refundable. I'd seen a footnote that the fee was non-refundable, but interpreted it to mean only if they actually did some work and processed an application. I had not completed an application and did not intend to after learning of the extra $295.

Using the email support system so I would have documented proof if I needed it, I insisted on a refund. Still no go.

When I explained there had been no set-up to justify a 'set-up' fee, they responded that the fee was really an 'application' fee - non-refundable, as explained in the footnote on the order page.

Basically, they were telling me I'd paid $89 for a link to an online application, which I had not and did not intend to submit.

Finally, A Refund

I explained I would not take no for an answer. If we couldn't work this out I'd report them to the Better Business Bureau for undisclosed fees, file a complaint with my credit card company, and copy the company president on each. My complaint was sent to the next level.

Finally, after an additional three day wait, the refund was approved.

Avoid An Internet Merchant Account Trap

I made the mistake of taking information at face value and relying on the reseller's good reputation in other areas.

To avoid unpleasant surprises such as mine, insist on all information and agreements up front, before committing to the account or paying initial fees.

Having all of the documentation may not be enough. Be sure you understand all aspects of your Internet Merchant Account agreement as well as fees and equipment required.

If you find incomplete, unclear, or conflicting information, ask questions.

If your sales representative is more interested in getting your signature than helping you understand your commitments, ask for another representative or go elsewhere. There are many, many Internet merchant account options available. You need not be trapped into one that is uncomfortable for you.

Based on my own experience, I developed a list of seven multi-part questions to ask a potential merchant account provider. Before contacting a provider about fees and agreement details, you may also want to familiarize yourself with all of the potential fees associated with an Internet merchant account.

See "Questions to Ask Potential Ecommerce Merchant Account Providers" for my list of seven questions to ask potential merchant account vendors.

January, 2004 Update

After the merchant account reseller said I would get a refund, I took it on faith they would follow through. Unfortunately, about six weeks later when I was reconciling credit card statements I saw they had never issued the refund.

I decided to file a complaint with my credit card company. I just received notice that they finished investigation of the charge and my refund is now permanent.

So, one more lesson: Be sure to check that any refunds/credits are actually posted. There is a finite window during which you can file a complaint with your credit card company. (60 days I think. Check with your own credit card company.)

May 2004 Update

My friend Julie Hood at http://www.finallyorganized.com took initiative to convince the company to change the merchant account disclosures on its site (I think she must have gotten tired of hearing me get all hot and bothered every time the company was mentioned. lol! ) After follow-up and some persistence getting to the right person, she did it! Thee company now fully discloses the early termination fees.

About the Author

Bobette Kyle draws upon 18+ years of Marketing/Executive experience, online marketing experience, and a marketing MBA as inspiration for her writing. She is publisher of WebsiteMarketingPlan.com and MyOnlineWeddingHelp.com, as well as cofounder of Daysteps LLC.

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