Posted by William Charles on June 23, 2017
Bank Account Bonuses

Published on June 23rd, 2017 | by William Charles

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What Are Merchant Services (Common Requirement For Business Banking Bonuses)?

A lot of business bank account bonuses require you to activate and use merchant services. My advice has always been to avoid these types of bonuses and readers always want to know why. The best way to explain why I don’t think those bonuses are worth doing is to explain what merchant services are.

Merchant services basically refers to the ability for a business to accept cards (debit & credit) and more recently NFC/RFID payments. If you have a business that requires these services then switching providers might be worth considering for a bonus but if you don’t need these services I don’t think it’s worth the effort involved for the following reasons:

  • Merchant services aren’t free. Usually you pay a monthly fee to accept payments and then an additional fee for each payment accepted, the amount you pay will depend on the types of cards used by your customers. Before you get ideas of running up hundreds of thousands in credit card payments to yourself, this is strictly prohibited by all providers and enforced. In addition there is usually a minimum time commitment and heavy early account termination fee.
  • You might create a tax liability. If you’re accepting card payments then it’s likely the government will see this as revenue earned and you’ll be required to pay taxes. I’m not a tax professional so please consult one to discuss this with a licensed professional.

I love bank account bonuses, but I try to stick to ones that are easy and anything that has activating merchant services is an easy pass for me. Have you ever signed up for a business bank account that required merchant services? Do you have anything else to add? Let us know in the comments below.



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David T
David T

I actually work in merchant services. Something else to consider is that they usually come with a time commitment before you can close the account and an early termination fee of several hundred dollars.

Max
Max

>running up hundreds of thousands in credit card payments to yourself,

Why would you do this? The cashback you’d get from credit cards would be much less than the interchange fees, wouldn’t they? Most requirements I’ve seen for merchant services are “accept two payments” or something like that. Surely you can get two of your friends to pay you a dollar each.

Revil
Revil

The one time I even thought about considering this was for GC liquidation. If you get merchant services on an Interchange+ pricing plan and only run regulated cards as debit, the fee works out to something in between a WU/MG MO and PO MO.

Superchurn
Superchurn

interesting…so one could theoretically buy say 100 $500 VGC’s and run them through it, hitting some serious MSR on some sweet CC bonuses, AND doing something like the $5000 Key Bank bank bonus.

I don’t know enough about the merchant services fees involved to calculate the profit, but its tempting now

Zalmy

See my comment on the Keybank thread

MickeyMouse
MickeyMouse

Tried finding the Keybank thread but couldn’t 🙁 looking to do the same thing as this poster if possible.

Just found some processors only 0.30% + $0.10 for Debit and low monthly fee.

Zalmy

Why would you create a tax liability? Your tax liability is revenue minus expenses. Surely it’s easy to see that your revenue minus expenses is only the percentage you earn/charge others for swiping..

Bob
Bob

Can you explain this further? The scenario of using a merchant account as a closed loop MS by having friends swipe their cards through your terminal and then routing the money back to them via another channel would result in $50k of revenue. How do you claim an equal amount of expenses to negate out the profit? This is all assuming a phantom business. I’m having trouble seeing what expenses you could claim without flat out lying.

Yoni

Couple issues I can see,

1.) The bank may reclassify you as a money services. Most likely close your account and possibly freeze your funds for 90 days before returning them.

2) I’d your with a TBYF bank and running cards through thier merchant services and all your running are VGC/MGC PPD from Meta/ USB/MYV, etc. Or just running the same per/biz card even if not cycling your CL it will be an outlier esp if it’s a new account both bank and MS.

They can decode the type and issue front the BIN -1st 6 digits of the card.

It could look like ML and you get a deeper investigation.

Yoni

That said for non-MS some TBTF bank MS fees and prices have gotten better to compete with other mobile MS payment providsrs Square, PP etc. Some do have monthly fees but also provide 24hr live phone reps (vs Square -e-mail only). As a small biz owner if their is an issue with payment/funds I much rather handle in branch or on the phone than drawn out emails.

BofA has fractionally lower fees, a free rebated reader for chip/SP/AP/and other contactless payments that uses BT and is $59 or FAR of you process $1,500 in first 60/90 days.

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