Before delving in the issues concerning the bank let us take a quick look at the merchant-consumer cycle. What is a merchant account and how does it work?



A merchant account serves as the facility in which customers can pay a merchant by way of the merchant bank. The merchant bank allows the merchant to accept credit card payments.

The merchant account service works this way:

* Customer pays via credit card at the merchant's point-of-sale system.

* Merchant accepts the payment for the product purchased.

* Payment details are transferred to the merchant bank to which the merchant is affiliated.

* Merchant bank transfers the required amount to the current account of the merchant less of the transaction fees and other costs that are included in the processing.

* Merchant bank issues a request if payment from the bank that the customer uses for his credit.

* Issuing bank pays the merchant bank with the amount that was paid to the merchant, less the fees.

* Issuing bank posts the transaction details on the customer's monthly billing statement.

* Customer pays the amount to his credit card company to complete the whole transaction process.

What are the types of merchant accounts?

* Card-present accounts include all merchant accounts that make use of payment facilities or terminals where the account details of the customers can be read through the magnetic stripe on the credit card. When the plastic card is swiped to the reader, the personal details of the cardholder will be accounted for the transaction. Since the merchant holds the card during the payment processing, there is less chance of fraudulent acts.

* Card-not-present accounts include all merchant accounts where card details are being inputted via a keypad that is connected to a network system. The merchant does not hold the card. The details are only being given to him so there is more chance that there are fraudulent activities.

Cardholders of Direct Merchants Bank accounts often complain about the high interest rates they pay for the use of their cards. The rates as it seems, could increases to about 31.9 - a rate that even the richest person would find really difficult to pay.

Most cardholders would start with a really low rate but as they continue to use their cards, the rates increase. The worst part is that the cardholders are not informed about any of such increases. There is no warning or explanation as to why there is an increase so the Direct Merchants Bank has fetched so many complaints from their cardholders.

A lot of the customers complain to the customer service arm of the DMB about the unexplained increase in the rates. Most of the time, the customer service representatives would offer waived monthly fees but the rates increase without any explanation and that makes the customers feel cheated at some point.