Photo by The Consumerist
The process of opening a credit card merchant account is like getting an enema with a rusty potato peeler. It’s something you don’t really want in the first place, and the longer it drags on the more you regret doing it.
This was the situation I found myself starting almost a year ago today (applying for a merchant account, not getting an enema).
Even though I’ve coded more than a dozen custom credit card integrations, have accepted payments online for 10+ years, and sell invoicing software that supports half a dozen credit card gateways, I had never been through the application process myself.
I’ve used PayPal, Amazon Payments, Google Checkout, and the PayPal merchant account/gateway equivalent (Website Payments Pro) with varying levels of appreciation, but I’ve always had one or two complaints. But no more!
For I have stared into the countenance of evil and lived to speak the tale…
A Long Time Ago (In Internet Years)
About a year ago I acquired a product called WeddingToolbox. It’s a SaaS app that allows an engaged couple to plan and share their wedding online.
The site was developed using Authorize.Net as the credit card gateway. “No problem,” I thought, “I’ll just pay the original developer to convert it to PayPal Website Payments Pro (WPP). A couple hundred bucks and we’re done.”
Except it wasn’t a couple hundred. The quote from the original developer was $900. Urgh.
I would have taken a crack at it myself, but the site is written in ColdFusion, and I haven’t touched CF since 2000. That learning curve wasn’t going to be worth it.
Normally I wouldn’t have thought twice about this decision from a monetary perspective, but the site was not profitable when I bought it. In fact, it was losing nearly $400 a month due to a long-term contract the previous owned had signed with a hosting company.
So it was a cash shark to begin with and I wasn’t looking forward to dumping another grand on top of what I had paid to acquire it, in addition to the monthly football I was carrying.
And when you do the math the payback is out 3 years (fees for PayPal WPP are $30/month, and Authorize.Net is around $55/month). So even though I’d be paying a bit more each month, I figured it was worth it until I could turn the site around and start making a few bucks. Then I’d invest in upgrading to a different gateway.
Application #1
If you’ve never applied for a PayPal WPP account, the process is as follows:
- Click a link in your PayPal account.
- Double check your business information is correct and submit.
- Wait 2-3 days for approval (I’ve never been rejected).
The application form for Authorize.Net is, simply put, painful.
It’s been a year so I don’t recall the exact amount of time it took me to fill out, but it was close to three hours. They asked for things I didn’t know you could legally ask for. They asked for proof of things I didn’t know I had. By the time I was providing them with the name and home address of my paternal ancestors I realized I might be making a mistake.
After a few hours of toil I clicked submit and then…nothing. Well, that’s not entirely true. I received an email that thanked me for submitting it that indicated billing for the gateway would start right away (but not billing for the merchant account since it had not been approved).
And billing started – I soon saw a withdrawal for the $99 setup fee and the $20 or so monthly fee for the gateway. Hooray! I couldn’t use it but I was sure paying for it.
And then…nothing. This time for real. Weeks went by and no word on my merchant account application. After 3 weeks I emailed them and no response. After 2 more weeks (and another $20 taken from my bank account), I called. And they told me my application had been denied.
“Denied?”
“Yes sir, it appears you don’t have the correct company name at the bottom of your website.” (the old owner’s company name was still there)
“Ok, I can change that. Could someone have emailed or called me about this 5 weeks ago when I submitted my application?”
“I apologize for any inconvenience we may have caused you.”
So I updated the company name while we were on the phone.
“Ok, sir, this will have to go back in for approval. Expect to hear from us in a few days.”
And then…nothing. No call, no email. Weeks passed and I called again.
“Sir, it appears your request has been denied.”
“Again, could someone have called me about this?”
“I apologize for any inconvenience we may have caused you. Your request has been denied because we don’t support gift certificates, and you allow people to buy gift certificates on your site.”
I was starting to get a little miffed at this point.
But all was not lost! The rep recommended a company that supported gift certificates. And I began the process once again.
As an aside: Authorize.Net was very gracious at this point. Since I had not used my gateway they refunded all of the charges to date – nearly $160 worth. I was impressed with their willingness to do so.
Application #2
It gets better. The next application involved, I kid you not, a downloadable PDF that I filled out by hand in ink. Ink, people! It brought me back to the glory days of 1996.
After another 2-3 hours of filling out the application, I faxed it to them (oh, the humanity) and then…nothing.
Seriously…I heard nothing for about 4 weeks. I forgot about it, actually, or perhaps formed a mental block to guard myself from undo anger. And finally, I called.
“Sir, it appears your request has been denied.”
“Seriously? Could someone have called me about…oh forget it. What’s the problem now?”
“I apologize for any inconvenience we may have caused you. Your application has been denied because you offer a plan that allows people to pay 18 months in advance. We don’t want to take on the liability of someone charging back during that 18 month period. If you remove this plan I can send your application back through our approval process.”
I explained to her that the website had been live and serving customers for close to 2 years and had never had a chargeback. And the 18 month plan is $79…given our sales volume you’re talking about a tiny amount of money over the course of 18 months.
But they wouldn’t budge.
Application #3
At this point I did what I should have done from day 1. I went back to the original owner of the site, and asked who he used for his merchant account. He gave me their name, I applied (another 2-3 hours), talked to them on the phone 2 or 3 times, and was approved within two weeks. Bravo…I was in business.
The tally at this point was nearly 12 hours of wasted time (this was at a time when I was only working 16 hours a week, so this was a huge amount of my productive time), and around $160 in fees spent with nothing to show for it.
But I wasn’t looking back! I wired up my credentials and everything worked like a charm. Money started coming in and I was happy.
Until the charges started coming in…
They Get You Coming and Going
Remember that whole “3-year payback” thing? Yeah, that went out the window in the first month.
The problem I noticed is the fees were not adding up to $55/month, they were closer to $85/month. In addition, about 3 months in I saw monthly fees of $135. But I didn’t notice this right away because several of the fees came through separately, on different days of the month, for different amount each month. It was hard to track how much I was paying, and for what.
This happened to all come at a bad time for me; I had a new baby and didn’t have time to sit on hold with a credit card company. So another month went by and I finally gave them a buzz.
They explained that in addition to my monthly fees there was an annual fee for <insert a good excuse to charge someone money here> and then another one for <contributing to the CEOs yachting fund>. These annual fees would be split over three months, and would amount to…I think it was $150 in total?
“And what about the extra $30/month I’m seeing added to what should be a $55/month fee?”
“That’s for your non-PCI compliance fee.”
“But I am PCI compliant.”
“Oh, well you need to go through our PCI compliance process and tell us about it, then.”
“Could someone have called me about this?”
“I apologize for any inconvenience we may have caused you.”
And it just went on and on. I spent about 2 hours trying to get their PCI compliance form to work, and no dice. I switched back to IE and it still crashed. Their port scanner crashed. I emailed support and they replied with (this is not a joke):
“If you’re using Safari as your internet explorer you will not be able to run the scan.”
I guess this makes sense to some people (internet explorer with no caps = your browser), but I just couldn’t take it any longer.
I was somewhere north of $500 out of pocket, I was chewing through time trying to get things straightened out, and more than six months had passed since I first applied. PayPal WPP…where are you when I need you?
When In Doubt, Get a Second Opinion
At this point I made the decision to bail on the traditional merchant account/gateway and go back to PayPal, no matter the cost. My time spent thus far was more valuable than what I would pay to have this work done.
Just for kicks, instead of paying the old developer their $900 bounty, I jumped on oDesk and posted the project. Bids came in and I found an excellent ColdFusion developer in Eastern Europe.
A week later the changes are done.
- Total cost: less than $100.
- Total time spent to apply for PayPal WPP: 5 minutes (with a 2 day approval process).
I want to hit myself in the head right now. For a guy who knows the right way to get something like this done, and trumpets outsourcing from the tops of the hills, it took me way longer than it should have to figure this one out.
But the story ends well…the PayPal WPP code went live yesterday. And today I will call my processor and politely tell them:
“I am cancelling my account. I apologize for any inconvenience this may cause you.”
Afterword
I know PayPal has its issues and that their WPP transaction fees are slightly higher than Authorize.Net (though break even is somewhere north of $5k per month in transactions). PayPal is far from perfect; but they’re not as bad as you think when compared to the alternative.
Please share your credit card processing horror stories in the comments.
