Merchant Warehouse favors opaque, expensive six-tier bundled pricing, and its customer service leaves a lot to be desired. Businesses should be weary of “review” Web sites that recommend Merchant Warehouse’s processing services. Merchant Warehouse relies heavily on Internet affiliate marketers like TopTenReviews to give it high ratings in exchange for a backdoor commission.
- CardFellow’s Experience with Merchant Warehouse
- Processing Profile
- Sales & Marketing
- Processing Equipment
- Merchant Warehouse Reviews
|Corporate Address:||1 Federal Street, 2nd Floor
Boston, MA 02110
|Statement Address:||P.O. BOX 6600
Hagerstown, MD 21740
|The Hagerstown, Maryland address above is not Merchant Warehouse’s address. It is the return mailing address for First Data, which is the company that Merchant Warehouse uses to process its credit card transactions.|
|Phone Numbers:||1-800-749-2173, 1-800-941-6557, 1-800-528-8430|
|Acquiring Bank:||Wells Fargo (primary relationship), US Bank, HSBC Bank USA|
|Affiliates & Additional DBAs:||Merchant Warehouse also operates under the name Capital Bankcard|
|Key People:||CEO: Henry Helgeson|
|Company Structure:||Independent Sales Organization (ISO), Merchant Acquirer|
CardFellow’s Experience with Merchant Warehouse
CardFellow’s experience with Merchant Warehouse is somewhat limited because it was removed from CardFellow’s marketplace for violating the terms of service. To date, it is the only processor that has been removed.
CardFellow has analyzed quite a few Merchant Warehouse statements over the years, and we have found that it favors tiered pricing, which is opaque and expensive when compared to more cost effective pricing models, such as interchange plus.
It has also been CardFellow’s experience that Merchant Warehouse tends to be more interested in acquiring new clients than in servicing existing ones. Its customer service is subpar due to a lack of responsiveness, and resolving an issue will often require persistence.
To its credit, Merchant Warehouse offers a comprehensive line of proprietary equipment and software options, but none seems to offer enough benefits to overshadow its expensive, opaque pricing and poor customer service.
Merchant Warehouse favors six-tier bundled pricing. This pricing model conceals interchange rates, allows for inconsistent buckets, and allows the processor to intercept vouchers on credit card refunds.
Six-Tier Bundling Pricing
Merchant Warehouse typically utilizes a six-tier pricing model that divides credit and debit card volume into three rate categories called qualified, mid-qualified, and non-qualified.
Tiered pricing allows Merchant Warehouse to conceal its markup by routing interchange fees to the pricing tier of its choice. This allows the processor to surcharge transactions without notice to its clients, thereby increasing costs behind the scenes.
Tiered pricing also allows Merchant Warehouse to entice businesses with a low qualified rate and then surcharge the majority of transactions to the higher mid and non-qualified rate categories.
The following is an excerpt from a Merchant Warehouse statement that shows its six-tier pricing at work. As you can see, 64% of credit card volume and 100% debit card volume is being surcharged to the higher mid and non-qualified pricing tiers at rates of 3.09% and 3.74%, respectively.
The following is an excerpt from a Merchant Warehouse application.
This application is proposing six-tier bundled pricing with a qualified debit rate of 0.39% plus a $0.25 transaction fee, and a qualified credit card rate of 1.69% plus a $0.21 transaction fee. This may sound enticing until the mid and non-qualified surcharges are considered.
The mid-qualified surcharge is 0.50%, and the non-qualified surcharge is 1.99%. In order to calculate the total mid and non-qualified rates surcharges must be added to the qualified rate. Doing so yields the following six-tier pricing structure:
|Qualified:||0.39% + $0.25|
|Mid-Qualified:||0.89% + $0.25|
|Non-Qualified:||2.38% + $0.25|
|Qualified:||1.69% + $0.21|
|Mid-Qualified:||2.19% + $0.21|
|Non-Qualified:||3.68% + $0.21|
Referring back to the pricing section, we can reasonably assume that 60% or more of total volume will be routed to the mid and non-qualified rates, making Merchant Warehouse’s pricing a lot more expensive than it initially appears.
Merchant Warehouse is an acquirer that utilizes the services of several different processors, the largest of which is First Data.
First Data is the largest credit card processor in the world, and it resells its processing services to thousand of banks, independent sales offices and acquirers. Merchant Warehouse is one such company that uses First Data’s processing services.
The most obvious effect of this relationship on a business that is considering Merchant Warehouse is that a portion of customer service will be handled by First Data.
Merchant Warehouse accepts risk for the businesses that use its processing services. This means that it has in-house underwriters that decide for which businesses the company will provide processing services.
These in-house underwriters also decide when to hold a business’s funds and impose reserves or ACH delays.
Sales & Marketing
Merchant Warehouse runs a very active online marketing campaign that includes aggressive affiliate marketing. It also maintains a large network of resellers and agents.
Merchant Warehouse pays many different “review” Web sites to rank it as one of the “best credit processors.” These Web sites earn commission from Merchant Warehouse for referring customers to its service.
These referral partners are called affiliated marketers, and many are misleading because they appear to be unbiased when in fact they are not.
For example, TopTenReviews is one of the most notorious affiliate marketing Web sites. TopTenReviews is not impartial. It ranks processors in order of how much commission they pay, which is why Merchant Warehouse is consistently in the top five.
Another large affiliate marketer for Merchant Warehouse is Vistaprint.
When researching processors online, it’s very important to consider the source before taking any reviews or recommendations seriously. Check out CardFellow’s article about credit card processor reviews for the facts.
Resellers & Agents
Merchant Warehouse uses a large network of companies and individuals to build its client base. These independent sales offices and agents sign up businesses for Merchant Warehouse’s processing services in exchange for a residual commission. This referral payment structure is typical in the processing industry.
For example, the following is an ad that Merchant Warehouse recently ran in a trade publication that promises independent agents an 80% commission on referrals.
More comprehensive information about its agent and sales programs can be found on Merchant Warehouse’s web site for its ISO & Agent Program
Merchant Warehouse offers a full suite of non-proprietary machines and gateways such as those from Verifone and Authorize.net, and it also offers a proprietary line of equipment and software such as its Genius Customer Engagement Platform and MerchantWARE Gateway.
Genius Customer Engagement Platform
Similar to non-proprietary credit card machines offered by manufacturers such as Ingenico, the Genius system supports credit and debit card processing, mobile wallets, NFC, EMV, QR codes and gift cards.
In addition to offering non-proprietary gateways such as Authorize.net, Merchant Warehouse has a proprietary gateway called MerchantWARE.
MerchantWARE supports credit and debit card processing, recurring transactions, and tokenization with off-site vault storage of credit card information.
Support for MerchantWARE is available during normal business hours, which can be inconvenient for development or for dealing with unforeseen issues.
Merchant Warehouse Reviews