Is Your Company Getting Scammed?
By Rana K. Williamson
One of the most frequent mistakes new entrepreneurs commonly make is suffering setbacks due to issues that could have been prevented. In other words, entrepreneurs cannot control general economic conditions. If the economy takes a nosedive, a company may be affected in the near-term. But employee embezzlement, merchant account scams and other hardships often result in small business failure. But with a bit of foresight, avoiding many of these risks is possible.
Below are tips on the risks of merchant account fraud. This is a common risk for small businesses, but one that can be neutralized with a bit of insight.
What is merchant account fraud? Small businesses need to process debit and credit card payments. In order to satisfy this customer need, setting up a merchant account is required. A merchant account is a type of bank account that allows a business to accept payments via credit and debit card. Oftentimes, this type of account is set up through an intermediary called a merchant service provider (MSP) or payment processor.
What are the risks? Although there are legitimate MSPs in the marketplace, there are also countless fraudulent, shady businesses. Entrepreneurs can see this when they search merchant account reviews . Illegitimate merchant service providers tend to charge incredibly high and/or hidden fees to unknowing small businesses. These charges are often very small, but spread over tens, hundreds, and thousands of clients per month, these charges can add up to substantial amounts of money and put enormous financial pressure on new small businesses. Some shady companies will go so far as to steal credit card numbers and other sensitive customer information.
These are some of the most common hidden fees that illegitimate companies will charge:
• Termination Fees
• Annual Fees
• Retrieval Fees
• Gateway Fees
• Chargeback Fees
• Hidden Setup Fees
• Bank Setup Fees
• Software Fees
• Customer Support Fees
How to prevent merchant account fraud?The best way to prevent this is for entrepreneurs to take a very active role in the relationship with their merchant account provider. Cash flow is the lifeblood of any company. Too many entrepreneurs blindly trust merchant account providers and never conduct internal audits of cash flows to determine whether hidden fees are being charged.
How to search for a reputable MSP? When searching, there are a few general guidelines to help entrepreneurs with their search:
• Scour the internet for merchant account reviews
• Only choose a company with no, or very, very few, poor customer reviews
• Stay away from new firms. Let someone else test them and be the first ones in!
• If it sounds too good to be true (fees too low), then it probably is
• Make sure to request a full price list of all charges that will be assessed
• Test your choice with a credit card that can be easily canceled to make sure the service is being carried out according to your contract
How to ensure the MSP remains reliable? Just because entrepreneurs find a good firm and things are going well does not mean something bad won’t happen. A new employee could come in and begin conducting fraudulent activity without the knowledge of the company. Internally auditing cash flow statements and service provider fees every month will help assure that no hidden fees are being charged.
Rana K. Williamson is a former university professor who is now a professional writer and researcher. She focuses on cost-saving techniques and insurance news. She resides in Texas.
May 6th, 2019
June 19th, 2017
January 18th, 2017
January 4th, 2017