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Merchant Account Best Practices

The PayDiverse Walkthrough

Merchant Account Best Practices

Here are some recommended best practices to ensure the merchant account is set up properly and remains in good standing. Please take the time to thoroughly read these important best practices.

1. Protect your MID

a. RDR (Rapid Dispute Resolution)– This is CRITICAL to protecting your MID. Please DO NOT use the MID until your RDR is turned on and fully functional, otherwise, it’s very likely the MID will be closed in a few weeks and your MID will be deactivated, rendering all our efforts in vain. We will make an introduction to a 3rd party provider if you would like.

b. 3D Secure– is a security protocol for online transactions that adds an extra layer of protection. Cardholders may need to enter a unique authentication code to prove their ownership of the card. It’s supported by major card networks, reduces fraud risk, and increases security in online payments for cardholders and merchants. We recommend you implement this as well. We will make an introduction to a 3rd party provider if you would like.

2. Test Your Descriptor- a descriptor is how the transaction will appear on a customer’s credit card statement. Ensure yours is correct and accurately describes your product/service to help your customers identify the charge. Your receipt to the customer should match this descriptor to avoid any confusion and lower the likelihood of the customer initiating a chargeback. This will help you minimize Chargebacks (CB). Run a few test transactions on your own card to test the descriptor and ensure it matches the customer’s receipt and contains the correct name and phone number so your customers will recognize the charge.

3. Test Your MID– run a few test transactions on your own credit card and then refund the transactions to make sure the refunds are being issued properly.

4. Start Slow– Gradually increase your transaction volume each day and each week. Spread your volume on this MID out over the course of a month. Do not max it out in the first week or two. Most banks are keeping a very close eye on new merchant accounts for the first 3-6 months, if you are slowly increasing the volume it will decrease the chances that your account will be flagged.

5. Customer Service Phone #– Make sure your Customer Service # and call center is functional prior to using the MID. You must have a live person answering the phones (not a recording). The banks will periodically run audits and will call and test your customer service to see if someone is answering and how long it takes to get a live person on the phone. Make sure your hold times are as short as possible, the longer you make the customer wait to speak to a representative the more likely they are to dispute the charge.

6. Consistency is Key– each month run consistent volume and consistent transactions (ticket sizes). Volume consistency is important because banks do not like to see major spikes in volume. This also helps with keeping a stable chargeback ratio. If you process a very high volume and then the volume decreases, your chargeback ratio will automatically increase because chargebacks typically hit several weeks or even months after the initial transaction was run.

7. Stay Below your Monthly Limit– Your MID has a limit, DO NOT run it to the max, especially in the first 3-6 months.

8. Chargebacks– It does not matter if you win or lose your case, any chargeback filed by a customer will count towards your Chargeback ratio & hard count. This will hurt the health of your MID. Good customer service and a liberal refund policy will help keep chargebacks low.

9. Chargeback (CB) Monitoring– We have partnerships with several CB Monitoring services. Since there is no monthly cost, and you are only charged when they contest a chargeback, this is essentially a free insurance policy for your merchant account. The cost is essentially the same as what your processor will charge you for a CB. They will monitor your MIDs and catch MOST (but not all) of the CB attempts and allow you to offer your customer a refund before the chargeback hits your hard count.

10. Approved Products– Only Use your MID for the products and URL the bank has approved you for. Also, make sure that the price points you run on the account match what is on your website. If the bank catches you using it for a different URL or product, you not only endanger yourself by having the MID closed, but you also endanger the processor of placing you on the industry blacklist called the TMF (Terminated Merchant File). If you end up on this, list it is very difficult to get removed.

11. Bank Balance– Keep a balance in your account of at least 10% of the monthly approved volume to cover fees and chargebacks and accounts are often closed when merchants reject debits from the processor (i.e. $50k MID should have a $5,000 balance at all times, there is a large cushion for banks to pull out balances).

12. Monitor Your Bank Account– We advise monitoring daily deposits into your bank account to catch any mistakes or deposit issues. It’s much easier to rectify such issues when they are fresh rather than older and stale.

Keep in mind if your MID gets closed the processor will most likely hold your money for up to 180 days, so it is very important to follow the best practices above.

If you have any questions, please let us know, our experienced team would love to help you keep your new merchant account healthy and live for a long time!

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