Canadian Merchant Accounts - Everything a Small Business Owner Wants To Know

Most small business owners and merchants understand what a "merchant account" is, but for those that do not know... it means the ability to accept credit cards and in Canada debit cards too.

In Canada merchants can offer their customer the ability to pay by credit cards or debit card (which operates on the interac network.)

Merchant accounts in Canada can be set-up by either one of the big banks or a private label payment processing company.

For a detailed definition for what a merchant account is go to wikipedia

Both types of companies are good choices, however the primary big difference is that the Private Label Merchant Account Providers usually offer a lease-to-own on Point-of-Sale Terminals for Retail Merchants and the Bank Merchant Account Providers usually do not. The Bank's usually only offer a rent ONLY program on retail Point-of-Sale Terminals.

Other then that both types of companies offer very similar services.

Basically there is only 2 levels of Merchant Accounts in Canada:

1. MO/TO and/or E-commerce Merchant Accounts

or

2. Retail Merchant Accounts

MO/TO stands for telephone/mail orders and e-commerce is internet orders. MO/TO and e-commerce merchant accounts fall under the same umbrella because they are both considered "card not present" transactions.

Retail is obvious and in Canada the big difference is "card present" transactions Vs. "card not present" transactions.

The reason this is a big difference is due the rates associated with "card present" transactions vs. "card not present" transactions.

Typically "card present" transaction receive a lower discount rates over "card not present" transactions.

The reason is the Credit Card Processors see "card present" transactions less risk for fraud.

In Canada most companies provide 2 basic discount rates:

1. "Card Present" rates or sometimes referred to as "qualified rates".
2. "Card Not Present" rates or sometimes referred to as "not qualified rates"

WARNING: It is important to find out what you will be paying for both rates, otherwise you may be in for a surprise on your first bill.

Many Merchant Account Providers tend to only quote the "qualified discount rate" to secure your business and then the merchant finds out later that 50% of their transactions are actually MO/TO orders and they are being charged a much higher rate.

There are basically 6 different types of Point-of-Sale Terminals:

1. The old knuckle buster.
- Old obsolete system, need to dial in for authorization

2. Dial-up Debit and/or Credit Card Terminal.
- most common system, works by plugging into existing phone line, immediate approval

3. IP/Broadband Debit and/or Credit Card Terminal
- more recent with high-speed internet, works the same as a dial-up unit, but faster and does not tie up phone line

4. Wireless Debit and/or Credit Card Terminal.
- can be hooked up by IP or Dial-up, works similar to a cordless phone, works up to a certain meters away

5. Cellular Debit and/or Credit Card Terminal.
- runs on the cellular network, allows your unit to be mobile

6. PC Software with plug-in Debit PIN Pad or card-swiper bar.
- integrates into you current PC computer, not as common

7. Fully customized system.
- for BIG businesses and very expensive and can involve all aspects of the above examples

1. Comparing 'apples' to 'oranges'.

Not all Merchant Account Providers are equal. Services can vary and sometimes it can be advantageous to pay more for better services. If you can not get a hold of customer support at all times during your business hours then is really worth while using that particular merchant account provider. Service, service, service - research how good a company's services is. The best thing to do is to phone their tech/support line several times through out the day and see what you get before making any concrete decisions.

2. Not knowing your 'rights' when it comes to accepting credit cards.

Not be trained correctly on accurate protocol and procedures that help protect the merchant from fraud and costly 'chargeback' scenarios. When a merchant chooses to accept Credit Cards they also are accepting that it is their burden of proof that all sales are legit.

Here is a good link (www.visa.com/rules_for_merchants )on the basic rules of conduct that all merchant's should read at least once.

3. Low Ball Deals.

If one company is offering a major discounted rates compared to most companies then there is a chance you are NOT seeing all the rates and fees associated with their services. If seems too good to be true, then chances are greater than not that it is. Some Payment Processor's will advertise low front end rates, but then back end with tons of hidden fees to more then make up for their low front end rates.

4. FREE Equipment.

There is NO SUCH THING AS FREE. Every business is in business to profit, why would they just give something away for free if they are not finding another way to profit from the transaction? Enough said on this one.

5. Just looking at Visa,MasterCard Discount rates and Debit Transaction fees.

There are many other fees that are associated with merchant accounts/payment processing. Visa, MasterCard, and Debit are usually just the obvious ones. Typically there are monthly system access fees, maintenance fees, set-up fees, early termination fees, statement fees, added value fees, settlement fees, etc.

The best way to protect yourself is to hire a merchant account specialist to assist you in making a educated decision and if you choose to do it yourself then look at the over all program before making a decision on who will be your payment processing provider.

Click Here to Learn 'The 17 Essential Questions Every Canadian Small Business Owner Must Ask Before Choosing A Payment Processing Provider'

What most merchants do not understand is that Visa and MasterCard have buy rates for all Credit Card Processing Companies and those buy rates are public notice.

They are called 'interchange rates' and can be found by typing into a search engine 'mastercard canada interchange rate' and/or 'visa canada interchange rate'.

Once you find that rate you now know what the basic base costs are to the payment processor providers are.

Now you usually cannot expect to secure the base rate because the payment processor's have cost and expenses themselves and need to stay profitable too, but this is a good indication to tell if the rates you are being quoted are way off.

One of the best ways to help you secure a low rates with a company that provides stella services is to seek out the advice of a merchant account specialist.

Two types of Merchant Account Service Providers in Canada:

1. Private Label Merchant Account Companies or known as ISO's in the Industry "Independent Sales Organizations."

2. Sister Bank Merchant Account Companies

Private Label Companies: (Just to list a few)
CollectivePOS
Cardex
Monex
Tangerine
Conquest Financial
VersaPay
Nova
First Data

Sister Bank Companies:
BMO = Moneris
Royal Bank = Moneris
CIBC = Global Payments
TD = TD Merchant Account Services
Scotia = Chase-Paymentech