Choosing The Right Merchant Account Provider

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Published – 09/08/2019 11:35 am

As a business owner, you want to succeed.

You undoubtedly want to increase your sales and make more money. The best way to do this is to offer your customers the ability to pay for merchandise with their credit cards. Whether you operate your business in a physical location or online-only, allowing customers the option of credit card payment is logical. You will increase sales because of the convenience of the payment options. The vast majority of shoppers, online and in-person, prefer to pay with their credit cards. Opening a merchant account is the way to give your customers more payment options. But you must find out as much as you can about merchant accounts and merchant account providers.

A merchant account is set up through a bank or an online merchant account provider for a retail or online organization to accept credit cards as payment from customers. A merchant account is not a bank account. The merchant account provider’s job is to place the money you earn from credit card sales into your bank account. It used to be that merchant accounts were only offered by banks and providers to retail businesses located in a physical location. But with online shopping gaining popularity over the past several years, merchant account providers have started providing accounts to online business owners. Even though most banks still do not offer online merchant accounts due to the constant concern over credit card fraud, many online merchant account providers provide services, especially to those merchants that market their products online. Because of the high number of merchant account providers out there, it is vital that you research all aspects of them, what services they provide, and especially the costs they impose, so that you don’t lose precious profits.

When looking into merchant accounts and providers, be aware that they will offer two types of payment processing. These are manual and real-time processing. Manual processing requires that the credit card number be delivered through a phone transaction, fax transaction, or an online order form. The order is processed manually by contacting the payment processing company (through an Internet connection) to verify the credit card number or by using a point of sale machine to swipe the card at the time of purchase. This type of processing is more secure, less costly, and ideal for a low-volume merchant in a physical store location. Real-time processing is perfect for web-based merchants because the credit card is immediately processed at the time an order is placed. Pending verification and approval of the credit card, the customer receives notification (via e-mail) that their order is accepted and fund transfer is approved. This is the less secure of the two processing options.

There are costs associated with opening and sustaining a merchant account. Not all fees are necessary, and not all merchant account providers will charge them. One type of cost is the application fee, which covers the costs of processing your application, whether you open an account or not. Many merchant account providers will waive the fee if you decide to open an account. And some merchant account providers do not charge this fee at all. There is often an annual fee associated with a merchant account as well. Merchant account providers charge this fee simply for holding an account with them. Another typical fee is the statement fee, a monthly fee that can be as much as $25 per month and is supposedly imposed by the account providers to cover their own costs. Yet another fee is the discount rate, which the merchant account provider earns from each of your sales, usually between 2 and 4 percent. Like the discount fee, the fixed transaction fee is also based on each sale, but the provider takes the same amount regardless of the cost of the product purchased, usually .20-.30. Usually, a termination fee is buried in the fine print of your agreement with your provider. Because some providers require a lengthy commitment period of more than two years, this fee applies if you cancel your account early. Various miscellaneous fees are levied on your account. Often, these charges are withdrawn if a customer requests a refund and wants the amount credited back to their card. There are many costs associated with an online merchant account, and it can cut into your profits. It is important that you evaluate different merchant account providers you are interested in to save yourself money down the line. You can also use your current sales information to guesstimate your merchant account costs.

You will likely have a long relationship with your merchant account provider. Therefore, you should have the utmost trust and confidence in them. Your provider should offer various services that will give you options in making your business transactions run smoothly. They should be able to accommodate several brands of credit cards (Visa, Mastercard, Discover, American Express, etc.) and provide other payment alternatives, such as PayPal. They should have a record of impeccable service and reliability. They should also be first-rate customer service providers. Any problems should be handled discreetly and quickly. Despite the seeming necessity of having a merchant account provider, it can make or break your business with its fees and service. That is why it is essential to know a merchant account provider’s ins and outs and choose one carefully.

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