Magazine Sales Merchant Accounts:
Voted the #1 High Risk Merchant Account Provider, Soar Payments is focused on providing affordable magazine sales merchant accounts for our clients.
Our goal is to be the undisputed best magazine merchant account provider for your magazine sales, magazine subscription and newspaper sales business. To accomplish that, we need to cater to the unique needs of different magazine sales businesses. For the magazine industry, we’ve created the below “magazine credit card processing cheat sheet”. It’s designed to provide magazine sales companies with a single page to obtain all the information they’ll need to obtain a phone sales, call center based, mobile / door to door sales, or eCommerce magazine merchant account and succeed long term when accepting debit and credit card payments.
Table of Contents
MAGAZINE SALES INDUSTRY CATEGORIES:
SIC Code: Businesses in the magazine sales industry would generally fall into one of the following SIC codes:
- 5192: Books, Periodicals, and Newspapers: Primarily for call center based magazine sales businesses
- 5963: Direct Selling Establishments: Primarily for retail or door to door magazine sales businesses.
The magazine sales industry’s use of MCC codes is fairly straightforward. If your sales operation is based in a call center, or uses inbound or outbound calling to generate the bulk of your business, then you will typically use the SIC code 5192. If, by contrast, your business sells primarily through door to door sales, or via a retail location, you will use the SIC code 5963.
See the entire list of SIC codes here.
NAICS Code: Magazine subscription sales, and newspaper sales companies generally use one of the following NAICS codes:
- 424920: Book, Periodical, and Newspaper Merchant Wholesalers: Often used for phone based magazine sales.
- 451212: News Dealers and Newsstands: Often used for door to door magazine sales businesses
- 451211: Book Stores: Primarily for retail bookstores, magazine sales, DVD and other retail products.
There only a few NAICS codes that magazine sales businesses use, and selecting which NAICS code is largely depending on the specific business model that the magazine subscription sales business uses.
See the entire list of NAICS codes here.
A Note From Our CEO
Adam CarlsonSoar Payments, CEO
It’s a great time to be in the magazine sales industry.
People love their favorite magazines, and even better, they love those magazines for a good price regularly delivered to their home or office. As a result, magazine subscription and newspaper subscription sales companies are booming.
At least that’s what a few of our magazine sales merchants have told me personally.
OK, maybe it’s not always that good, after all there’s still a lot that can go wrong, particularly with payments and chargebacks. Things like:
- Getting approved to sell with the payment plan you want.
- Making sure your CRM integrates.
- Avoiding and recovering money on illegitimate chargebacks
The good news is, these problems are all solvable. It took me about 10 hours of research, but I put together the below “magazine merchant account cheat sheet” for entrepreneurs in the magazine and newspaper sales industries including, door to door, online, retail and phone sales, to help you navigate these pitfalls.
It’s my sincere hope that you find this article useful (because I put a lot of time into it)… and if you need help with magazine merchant services for your business, I’d love to help you with that, too.
P.S. If you own an magazine sales business, and want reliable and affordable magazine credit card processing we can help you (in fact, magazine sales businesses are one of our specialties). Click here to begin a free online application.
June 28, 2016
Getting a Magazine Merchant Account
How do I get a magazine merchant account?
Getting a magazine merchant account for an outbound or inbound phone based magazine or newspaper sales business, or a door to door sales business isn’t as easy as talking to your local banker. The reason, is that for a credit card processor to accept magazine businesses, their sponsor bank must allow them to do so. Unfortunately, due to some bad actors, obtaining a magazine sales merchant account to accept credit card payments over the phone, via your companies website or door to door is increasingly difficult. That’s because most of the largest sponsor banks (e.g. Chase or Wells Fargo, etc.) no longer allow their credit card processors to offer magazine subscription merchant accounts. Thus, you’ll need a high risk merchant account provider (like Soar Payments) who can offer you a merchant account. Once you’ve found a magazine merchant service provider, you simply need to complete an online application, submit a few documents (e.g. a copy of the owner’s drivers license and a voided business check) and then wait 24-72 hours for underwriting to review your application and approve you. Once you’re approved you’ll be given all of the logins you need to start accepting credit card payments.
Why can’t I just go to PayPal for magazine sales credit card processing?
The short answer is because PayPal doesn’t want you. PayPal, Stripe, Square or any other payment aggregator doesn’t allow for magazine sales businesses. The reason,is that magazine sales are categorized as high risk. What’s a little unfortunate, however, is that payment aggregators (like PayPal) don’t do a lot of screening or underwriting on the front end, but only once you’ve started accepting credit cards for a couple of months. At that point, something will trigger a review of your business (maybe a particularly large transaction, a chargeback, a recurring charge, or one of a hundred other things) and when their risk team looks at your business they’ll immediately freeze your merchant account (and if they owe you any money they’ll typically freeze your funds) because you aren’t an acceptable business type. So, if you don’t want to live in fear of that happening (or if it’s already happened to you) you’ll need to sign up with a high risk magazine sales credit card processor (like us).
How do I know who accepts my specific type of magazine sales business?
In general, only high risk merchant services providers accept magazine sales businesses. And only a small sub-section of those do. The reason, is that their specific sponsor bank must be willing to underwrite magazine sales. Because Soar Payments works with over a dozen processors and sponsor banks we work with every type of legal magazine sales business, including inbound and outbound call center driven sales, door to door sales, and eCommerce sales.
That said, the magazine sales industry is constantly evolving, so if you’ve got a unique business model that we don’t already support, give us a ring or submit an application and we’ll discuss your newspaper or magazine subscription sales business and whether we can support it. But in general, if it’s a legal business type, we’ll provide a credit card processing solution for it.
What is the process for applying for a magazine sales merchant account?
Applying for a merchant account for magazine sales is fairly easy, just complete the four minute online application, then we’ll email you a PDF copy of the application with all pricing and terms for your electronic signature. We’ll usually also ask for a few supporting documents, such as a copy of the owner’s driver’s license or ID, and recent business bank statements if they exist.
Once approved you can begin accepting debit and credit card payments. We’ll also setup your chargeback management software (which is a must as a magazine sales company), enable chargeback alerts, e-commerce fraud filter (if you’re taking e-commerce payments you’ll want this), make sure your payment gateway is integrated with whatever CRM or software you’re running. And finally, answer any questions. In sum, we try to make it as easy as possible to get up and running accepting credit card payments.
How do I get a higher credit card processing volume limit?
If you’re approved for a magazine sales merchant account, your approval usually comes with a monthly volume cap. That means, that you can only accept credit card payments up to your cap each month (there’s usually about 10% of wiggle room, however). That’s fine if your cap is above the amount you’d like to accept in credit card payments, but typically it’s actually less than the amount you asked for. So, there is typically only one way that magazine sales businesses can deal with monthly credit card processing volume caps:
- Time: If your business is just barely over the cap, and not growing terribly fast, then it probably makes sense to just sit tight rather than shop around, and instead try to get some customers to pay via cash or check to help keep you under the cap, and wait until you have 3 or 6 months of credit card processing history. As long as your history is good (meaning low (and steady) chargebacks, you’ve paid your credit card processor and payment gateway on time without having any ACH bounces, and you’ve consistently processed at amounts at or near your monthly cap) then you can request and usually be granted an increase in credit card processing volume.
What is an underwriter looking for when reviewing my magazine sales merchant account application?
A magazine credit card processor accepts some (but not all) magazine sales businesses. All businesses must be reviewed on an individual basis by an underwriter, who is in general looking for two things: (1) that the business is operating legally and legitimately, and (2) that the financial rewards of taking on the business outweigh the risks. Let’s look a bit closer at what those mean.
- The business is operating legally and legitimately: This is pretty self explanatory, but the basic point is that a credit card processor and their sponsor bank are federally regulated entities, and as such are bound to do due diligence into your business type, and attempt to ascertain whether your business is operating legally. If it’s not, they won’t accept you. In the context of a magazine sales business, that means that you’re not using illegal marketing tactics, or not actually delivering the magazines, etc. With respect to legitimacy, you want to make sure that you’re disclosing your refund policy, your prices and packages are clear, and that you provide evidence that you responsibly sign up customers and are transparent with them about how much they’ll pay, what they’ll receive, etc. Frankly, none of this is a major concern in the magazine sales industry, but still, it’s something that the underwriter will examine.
- The business is a good risk v. reward: Credit card processors are for profit companies. That means they don’t want to accept merchants that they’ll lose money on. Credit card processors lose money when a merchant either doesn’t pay their monthly merchant services bill, or, more commonly, when they rack up a bunch of chargebacks and then cannot afford to reimburse the customer for the chargeback. So, if you wan’t to look good on this test, make sure that your magazine company’s business bank balance remains positive throughout each month (the higher the average bank balance the better) and make sure the business owner that signs the magazine sales merchant account has decent credit. Also, to the extent you have previous credit card processing statements that show that you have been able to manage your chargeback ratio, that’s ideal.
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Question? Ask Away. We’re Ready to Help.
If you’ve got a question about a payment gateway, chargeback management tool, magazine sales merchant accounts or anything related to your business’s payments, and want some advice, shoot me your question directly: AdamCarlson@soarpay.com.
Ready to Get Started?
Ready to start accepting payments at your magazine sales business, Click here to begin a free online application
Magazine CRM Integrations
Most magazine sales companies that have moved past the startup stage are using a CRM to manage their customers, and some integrate tracking payments into the CRM. If you plan to use a CRM you’ll want to make sure that your CRM integrates with your credit card processor.
More specifically, CRMs (and all software for that matter) integrate with the payment gateway, which in turn integrates with the credit card processor. So, you need to make sure you know what payment gateways your CRM integrates with. Then make sure that your magazine sales credit card processor integrates with that payment gateway.
If you’re going to use Soar Payments as your credit card processor, our payment solutions integrate with almost every major payment processor, so that isn’t an issue. For some credit card processors, however, you’ll want to check as they may only integrate with one or two payment gateways.
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Reviews of Magazine Sales Payment Gateways
If your magazine sales business accepts payments over the phone (typically called MoTo payments) or over the internet (called eCommerce) then you’ll need a payment gateway.
A payment gateway is simply a piece of software that your salespeople can log into to enter credit card payments when they accept them over the phone. Or for ecommerce, it is the software that integrates with your shopping cart, which allows customers to enter their credit card information online and “check out”. In either case, once the customer’s credit card information is inputted, the payment gateway securely transmits the information to the magazine sales company’s credit card processor, who processes the payment. There are tons of payment gateways available to choose from, but most magazine sales companies use one of just a few, which are briefly reviewed below:
- Authorize.net Gateway: Created by Visa, this is the overall most popular payment gateway for all businesses generally. In the magazine subscription industry, it’s generally favored by smaller companies because it is easy to setup and it integrates with almost every type of CRM used by magazine subscription sales companies, and almost every shopping cart. The downside to Authorize.net is that it is not designed for businesses with chargeback issues (which most magazine sales businesses have) and as a result it doesn’t integrate well with most of the chargeback management solutions available. Similarly, it’s designed for smaller businesses, so the reporting leaves something to be desired with an Authorize.net payment gateway
- Soar Pay High Risk Gateway: Built on the NMI platform, it is favored by larger magazine sales businesses because it includes more robust reporting, and because it integrates with the most chargeback management platforms. Finally, because it integrates with most CRMs, it’s a pretty common choice for any magazine sales business that thinks it may grow above say, $30,000 in monthly sales.
- USAePay Gateway: One of the cheapest payment gateways available, it was designed, much like Authorize.net, for low risk merchants. As a result there are no easy integrated chargeback management systems. A downside relative to Authorize.net is that it doesn’t have as many CRM and shopping cart integrations. The positive, however, is that if your CRM does integrate, it’s generally a bit cheaper than Authorize.net.
A quick word about obtaining a payment gateway: Most magazine sales businesses end up getting their payment gateway from their magazine merchant services provider. The reason, is that merchant services providers get access to payment gateways at a steep discount over the retail price, and they generally pass along those savings to the merchant. As a result it’s generally cheaper to get your payment gateway through your magazine sales merchant services provider, as opposed to contacting the payment gateway directly for the service.
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What Magazine Sales Business’ Need to Know About Chargebacks
Obtaining a US merchant account for magazine subscription sales is tough enough the first time around. But once you’ve been dropped by a credit card processor for excessive chargebacks it gets extremely difficult.
That’s why it’s so important for a magazine sales business to be proactive about avoiding and managing their chargebacks, as excessive chargebacks are the most common reason why a magazine sales merchant account gets terminated. To do that, it’s important to understand why magazine sales businesses typically get a lot of chargebacks.
How Do Chargebacks Work?
A chargeback occurs when one of your customers contacts their issuing bank (the phone number on their monthly credit card statement, or the phone number on the back of their credit card) and disputes the charge. They can dispute the charge for a variety of reasons. These can include that they didn’t make the purchase (fraud chargeback), or that the magazine they received wasn’t what they ordered, that they were billed the wrong amount, that the magazine didn’t show up, that it was damaged, etc. (friendly chargebacks).
Whatever the reason, once the credit card customer has called their bank to dispute the charge, the chargeback process is underway. At that point, the issuing bank contacts the card issuer (Visa, MasterCard, Discover, American Express), who in turn contacts the magazine company’s credit card processor. They then withdraw the funds in question, and hold them temporarily in escrow while the dispute is resolved. If the merchant fights and wins the chargeback (by proving that the charge was legitimate) then the funds get returned to the business. If the merchant loses (or doesn’t fight) the chargeback, the customer gets their funds returned and the business is out of luck.
Why do magazine sales businesses get a lot of chargebacks?
Magazine sales businesses get hit with a large number of so-called ‘friendly chargebacks’.
What are Friendly Chargebacks: The term ‘Friendly chargeback’ is misleading, because they aren’t friendly at all. Rather, it means situations in which the customer did in fact make the purchase, received the magazine, but later decided that they either just didn’t want to pay for it, they regret the purchase, or don’t remember that they made the purchase. In those circumstances, the customer then calls the phone number on the back of their credit card (their issuing bank) and disputes the charge. When they initiate the dispute, a “chargeback process” has begun.
With friendly chargebacks, the reason magazine sales businesses are so vulnerable are numerous:
- Magazine companies are often run by small businesspeople who may not be familiar with how to properly setup payment receipts, credit card descriptors, eContracts, chargeback alerts, etc. in order to minimize chargebacks
- Many magazine sales businesses use monthly or recurring billing for their customers to pay for their subscription. In general, recurring billing leads to more chargebacks as either customers forgot that they made the purchase a few months ago, or want to stop paying for it, but find it more convenient to ‘charge it back’ as opposed to trying to cancel their magazine subscription.
- Sometimes fulfillment companies (the ones actually sending out the magazine) drop the ball and fail to mail out the magazine, causing the customer to chargeback the bill.
- Sometimes aggressive salespeople working for the magazine subscription sales company engage in deceptive sales tactics either by not fully disclosing the amounts of future payments or some other condition of the sale.
Our magazine sales business is legit, and we don’t ‘scam’ people, so I don’t have to worry about chargebacks, right?
Unfortunately, the chargeback process if heavily favored to the customer over the merchant. And perhaps more worrisome, there’s a significant segment of customers who use chargebacks illegitimately as a method for getting free stuff (in this case magazines), or as a free return policy when they decide that they don’t want the subscription anymore. So not fighting chargebacks is an invitation for scammers to steal your company’s money.
Fighting chargebacks, however, isn’t as simple as just providing a receipt or showing that the magazine was delivered. Rather, to win your response needs to be in a very specific format that the card brands allow, and it needs to address the very technical requirements that the card brands want addressed. Because of that, the vast majority of magazine sales businesses that try to fight chargebacks on their own end up losing almost all of them, and end up just giving up altogether. In the end, they end up having their magazine sales merchant account shut down or terminated because of excessive chargebacks. Thus, it’s important to first avoid all chargebacks that can be avoided, and second to fight chargebacks in an effective way.
How to Calculate my Chargeback Ratio?
The key to keeping a domestic US magazine sales credit card processing account in good standing is to keep your chargeback ratio below 2%. (Offshore merchant accounts can sometimes run at 3-5% chargeback ratios). In any case, you need to know how to calculate your chargeback ratio in order to know where you stand on that scale.
The first hurdle, is that each credit card processor calculates chargeback ratios according to their own formula. So it’s important to verify how your specific magazine merchant account is calculated first. But in general, credit card processors use either transaction count calculations or dollar calculations. For transaction count calculations, the formula is: The count number of chargebacks in a month divided by the total number of transactions in that month. For credit card processors that use dollar based ratios, the formula is: the dollar amount of all chargebacks in that month, divided by the total dollar in sales for that month.
It’s also important to note that some credit card processors count all chargebacks against you, regardless of whether they are won or lost, whereas other credit card processors only count against you chargebacks that are lost. If you are fighting chargebacks effectively, this is a very important difference.
Note: Chargebacks can be initiated by one of your customers at any time up to six months after the sale. The bulk of your chargebacks will typically appear between 30 and 60 days after the sale. So, it’s important to know that just because you processed in month 1 and didn’t see any chargebacks, doesn’t mean you can stop worrying about them.
Why does a magazine credit card processor care what my chargeback ratio is?
Your magazine subscription sales credit card processor cares a lot about your chargeback ratio for a few reasons. The first, is that unpaid chargebacks by merchants is the most common way for a credit card processor to lose money on a given magazine merchant. The second, is that high chargebacks are an early sign that your business isn’t well managed and will have future issues. The third, is that credit card processors (and their sponsor banks) are highly regulated entities, and they must monitor and terminate merchants who have excessive chargebacks in order to remain compliant with the card brands (Visa, MasterCard, AmEx, Discover, etc.). Fourth, a credit card processor, even a high risk credit card processor, has a reputation to maintain, and does not want to be associated with a business that has high chargebacks because in all likelihood that business will have a bad reputation long term.
In summary, there are a whole lot of reasons why you need to keep your magazine subscription sales merchant account below a 2% chargeback ratio. So make sure you’re keeping an eye on it (or use a high risk credit card processor like Soar Payments, who integrates with a chargeback avoidance and monitoring system which will keep track of it all for you).
How do I keep my chargeback ratio low?
There are lots of ways to keep your chargeback ratio low, but they all require you to take the time to actually implement. Here are a few ideas:
- Disclose Your Refund Policy:
If you have a generous refund policy, make sure you disclose it to all of your customers. You want to make them feel comfortable calling and requesting a refund from you rather than initiating a chargeback. And, if they’re outside the refund policy, at least they won’t be able to argue that you didn’t fully disclose it to them.
- Send confirmation and customer satisfaction emails:
If you accept credit card payments over the phone or via eCommerce, you need to make sure that you’re getting the customer’s email address and sending them a detailed receipt. It needs to include your company’s name and contact information. Detailed listings of what the customer ordered, shipping details, pricing information, and as many other details as you can include. The more the better.
- Integrate Customer Dispute Alerts:
The easiest way to cut your magazine company’s chargeback ratio by approximately 25% is to use chargeback alerts. A chargeback alert is essentially a notice to you the business owner that your customer has tried to initiate a chargeback, and gives you a 24 to 72 hour window to refund the customer and avoid the chargeback altogether. With the Soar Pay payment gateway these are fully integrated, and they happen automatically. But even if you’re not using Soar Payments (or our gateway) you can and should get chargeback alerts. It doesn’t work perfectly, but it does catch about 25% of all chargebacks.
- Be Generous With Customers:
If you’ve accepted payment via a credit card, the customer has 6 months to initiate a chargeback, and even if you win that chargeback it’s going to be a pain and expensive. So, if you have the opportunity to “work it out” with the customer, either by providing a partial refund, sending a free copy of a magazine, or some other relatively cheap solution, teach your team to do it. And that includes situations where the customer is outside of your refund policy, as long as the customer made their purchase within 6 months.
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