Everything went well at first: we did over $1000,000.00 in the first 18 months and it looked like were back for sure.  Our overhead had risen with our growth to $45,000.00 per month.  Then this economy hit, and this article is about what happened to our merchant account when that happened.

As if it wasn’t bad enough that people stopped paying us: as we laid people off and trimmed expenses to outlast the storm, doing all the toughest things like pairing back our offerings to only the most profitable ones and loosing marginal clients in the process, about 5% of our clients (Realtors and related vendors), in terrible shape for cash themselves, and who had bought online with credit cards, with large non-refundable deposits for work to be performed, decided to attempt to charge back (simply forgetting their commitments).

The way we became aware of this is that all of a sudden we had negative balances in excess of $20,000.00 in our accounts without warning of any kind, completely cutting off all of our income, causing transactions to be returned unpaid to our vendors, and nearly putting us out of business, and, if you accept credit cards, it could happen to you at any minute, unless you use PayPal to process your money.

You see: what we found out ‘the hard way’ is that when you use any other merchant services including your own bank, none of the money you collect, even for services performed up to a year before hand, is secure.

Regardless of the strength of your contracts (we eventually recovered almost all of the money), those customers can decide to lie to the banks at any time, about an e-check, or a credit card payment, and without warning that money will be removed from your company account, and you will have to go through all sorts of hassle to prove that it is your money to get it back: then after it is returned to you, they can contest it again, monthly for a year in some cases, and you can be repeatedly asked to start over again proving that it is your money!  If it happens a lot, the credit card companies can also decide to grab and hold large amounts of your money for up-to a year, without warning, any time they like!

In our case, we had had a PayPal account for years that we used for website purchases and various things, and we had never had a charge back from there: so we froze our other accounts, which we must leave open to get the over $10,000 in reserves that the credit card processing companies decided to cease and hold for up to a year!  Then we changed everything to run all our new money through PayPal, because they have both buyer and seller protection, so these catastrophes cannot happen: the 1/2 point over what were paying that PayPal charges is well worth it in my opinion to guard against such exposure.

In my many years in business in numerous businesses I had heard many times that people did not want to do business with American Express, and now I know why: but I had no idea until this happened that it could also happen with e-check (they are the worst!), with Visa, MasterCard..   The only way to avoid what we have been through and are still going through, which you do want to avoid, is to run all your merchant services through PayPal.  PayPal is your buffer between your customers and you, and independent third party with both your interests at heart, effective in completely eliminating the risk of going through our experience.

My recommendation now that I know what I know: run all of your merchant srvices, not just online transactions, ALL OF THEM, through PayPal: you will sleep better at night, and there are many other advantages too numerous to list here.  If you have not already done so, go to PayPal.com!