Some merchants use third party credit card processing because they have had difficulty getting a direct merchant account relationship. Others, unfortunately, may be unaware that they are under a third-party setup and can get much better rates from a direct setup.
What is third party processing? As the name implies, there is another organization handling merchant services between you and the payment processor. These “middle men” may offer a degree of convenience for new companies and low-volume merchants who would not normally be able to get a merchant account. People who sell products on eBay are most familiar with PayPal as a third party processor, and if sellers are only taking a couple thousand dollars per month in transactions the expense may be lower than getting a true merchant account.
As a business owner, a direct merchant account is the best solution in almost every case. Normally, a processor offering direct relationships will have a notice along the lines of “[Company] is a registered ISO (or MSP) of [Bank].” This notice essentially says that the processor is backed by a major financial institution (known as an “acquiring bank”), and you are getting a direct relationship. The acquiring bank essentially provides a line of credit that makes transactions possible, since there is actually a delay between settling credit card transactions and getting paid.
In a third-party merchant account setup, costs are higher and payments are delayed. This is because the third party has to defray the cost of fraud and ensure that large balances are going to get paid. With many credit card processing companies, including Capital Processing Network, a direct relationship may entitle you to next day funding, which means that money batched out (before a certain time) on one day will be in your bank account on the next business day. From a cash flow perspective, this can make your business run a lot more smoothly and reduce your dependence on lines of credit.
Some businesses may need to use 3rd party processors because they are unable to get merchant accounts of their own. For example, companies that are on the Terminated Merchant File (TMF List) or who are considered high risk merchants may be unable to get direct processing services. These businesses may end up paying upwards of 15% for the privilege of accepting cards. Companies outside the United States may also end up using 3rd party processors If none of these circumstances apply to you , then you should be using a traditional merchant account.
If you have a direct merchant account, and have a low number of chargebacks, then you may qualify for even lower rates through the Capital Processing Network Low Risk Portfolio. We offer lower rates and fees for qualified merchants, and also feature an Equipment For Life program designed to keep you up to date with state-of-the-art hardware and processing equipment. Whether you are on a third-party setup or looking to get better rates for your direct merchant account, we have solutions designed to get you the best possible rates for your business type. We are BBB accredited and would be glad to earn your business.