to merchants. To reduce risk, some banks limit approval to merchants in their geographical area, those with a physical retail storefront, or those that have been in business for two years or more. Marketing by independent sales organizations (ISO)/MSPs To market merchant accounts, an ISO/MSP must be sponsored by a member bank. This sponsorship requires that the bank verify the financial stability and suitability of the company that will be marketing on its behalf. The ISO/MSP must also pay a fee to be registered with Visa and MasterCard and must comply with regulations in how they may market merchant accounts and the use of trademarks of Visa and MasterCard. One way to verify if an ISO/MSP is in compliance is to check a website or any other marketing material for a disclosure "company is a registered ISO/MSP of bank, town, state. FDIC insured". This disclosure is required by both Visa and MasterCard and will cause a penalty of up to $25,000 if it is not clearly visible. In almost all cases, if there is no disclosure, the company is likely to be an uninformed fourth party or worse. Rates and fees A merchant account has a variety of fees, some periodic, others charged on a per-item or percentage basis. Some fees are set by the merchant account provider, but the majority of the per-item and percentage fees are passed through the merchant account provider to the credit card issuing bank according to a schedule of rates called interchange fees, which are set by Visa, Discover, and MasterCard. Interchange fees vary depending on card type and the circumstances of the transaction. For example, if a transaction is made by swiping a card through a credit card terminal it will be in a different category than if it were keyed in manually. Discount rates The discount rate comprises a number of dues, fees, assessments, network charges and mark-ups merchants are required to pay for accepting credit and debit cards, the largest of which by far is the interchange fee. Each bank or ISO/MSP has real costs in addition to the wholesale interchange fees and creates profit by adding a mark-up to all the fees mentioned above. There are a number of price models banks and ISOs/MSPs used to bill merchants for the services rendered. Here are the more popular price models: Three-tier pricing The three-tier pricing is the most popular pricing method