Retail and service based businesses that cannot accept credit card payments are at a disadvantage against their competitors. In the United States alone, we are spending 250 billion dollars a year with credit cards [Attard, 93]. It is no wonder that businesses want to accept credit cards, even though it means paying a percentage of each credit card sale to the acquiring bank or processor.
Attaining merchant status can be hard for small businesses, especially if they are home-based or sell by mail order [Attard, 93]. Banks are afraid of extending merchant status to businesses that present too much risk, and home-based and mail order business are perceived as high risk [Attard, 93]. Banks are afraid that an at risk business will not be able to handle any chargebacks that hit their account. If the merchant cannot handle a chargeback, the bank or ISO that processed the credit card will have to absorb the loss [Attard, 93]. In fact, VISA will penalize a bank if they have a merchant account that has more than 1 percent chargeback of their sales [Attard, 93].
Performing a search on the web for "credit card" or "merchant status" will lead to a number of pages claiming that they can obtain merchant status for your business. Small businesses must be cautious because there are many con-artists out there who offer to help a business gain merchant status and then walk away with the processing fee never to be heard from again [Attard, 93]. If you look at the credit card processing companies that advertise online, you will see that discount rates, transaction fees, and equipment sale/lease prices can vary widely. From what I have seen during my research, I would advise anyone trying to obtain merchant status to be careful. Shop around and read the fine print, especially if you are unable to open an account with an acquiring bank.
Here are some sites offering merchant status or credit card processing services. I do not endorse or discourage the use of any these banks or companies' services. I am only providing them as an example of what you will find out there.
