Merchant Accounts
Everyday cash is less commonly carried and payment by personal check is gradually becoming obsolete. Global credit and debit card processing have completely revolutionized the industry, becoming the most common forms of payment. The majority of small businesses and merchants world-wide are now accepting these cards because of the benefits of a merchant account, and to help grow and maintain your business’ competitive edge, you should accept plastic too. By providing alternative payment options to cash and checks, a credit card processing merchant account can be extremely advantageous for any business. Although some merchants tend to hesitate in signing up for a merchant account due to cost factors, the loss in sales and profits may be far more costly. The fact is, besides all the other benefits of a merchant account, people tend to spend more money when paying with a credit or debit card than when paying with cash. By accepting credit cards, your increased revenue will compensate for more than just merchant account costs. Make your business more successful, take advantage of the benefits of a credit card merchant account and credit card processing today!
Merchant Accounts - Understanding what a merchant account is
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Merchant accounts provide businesses with the ability to accept credit card and debit cards for purchases. There are several different aspects to a merchant account, which we will describe below.
Processing Services: To set up a merchant account, a business owner, or “merchant” must apply through a merchant service provider. Approval of a merchant account depends on factors which include, but are not limited to: Applicant and/or Personal Guarantor’s Credit Score, Business Type (Goods or Services Sold), Card Acceptance Method (Merchant Type), Monthly Volume, Average Sales Ticket, Business’ Financial Condition, Bank Account Type,Business Longevity and Refund Policies
Processing Rates & Fees: There are various fees associated with having a merchant account. These could vary, depending on the type and company providing the service, but all merchant accounts have 2 main costs, discount rates and transaction fees.
Discount Rates - With most merchant service providers, every processed sale is classified into 1 of 3 qualification levels (Qualified, Mid-Qualified, & Non-Qualified), and is charged a discounted percentage rate associated with that qualification. Each sale’s level and rate is determined by the type of credit card used, and/or how it is accepted and processed.
Transaction or Authorization Fee - This fee is charged for each electronic authorization request and transaction made, including all approved and declined sales, returns, voids, and batch settlements.
Processing Capability Systems: To process credit card payments, processing equipment or software is required to capture card information, make authorization requests, and close sales. Depending on business needs, equipment options include:
Terminals - Wireless, Contactless, Stand-Alone and Terminal/Printer Combination units
PC Software - Stand-alone or integrated into other business systems
Internet Gateways - Virtual Terminal or eCommerce versions
To maintain customer satisfaction and increase sales and revenue, it is becoming essential for businesses to have merchant accounts and accept credit card payments. Fewer and fewer customers carry cash, checks involve significant risk, and sending your customers running to the ATM machine could lose you valuable business.
Merchant Accounts - Things to consider when getting a merchant account
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There are several factors to look at as well as traps to avoid when choosing the best merchant account for your business. You should never just look at the rate (avoid the rate trap) and look at the overall operating costs and details associated with the merchant account.
Suspiciously Low Rates: Make sure the rate you’ve been quoted is for the type of transactions you’ll be processing. For example, many mail order merchants have mistakenly signed up for a retail merchant account with low rates and found themselves getting charged much higher fees because they were not swiping their customers’ cards. Ask whether the rate you’ve been quoted is an introductory rate. Some processors automatically raise your rates after an initial period, resulting in unexpected credit card processing costs down the line.
Average Ticket and Monthly Volume: Every processor will ask you to estimate your average sale and monthly credit card volume. This, in part, allows the processing company to determine the level of risk they are taking by extending you a merchant account. If you estimate far too low, you may run into trouble, as you are now a higher risk than the processor initially estimated. On the other hand, if you guess far too high, you may be required to file some extra paperwork and provide significantly more business or personal credit-related materials. Talk it over with your account representative; he or she should have plenty of experience estimating volumes and average tickets.
Understanding Fees: When you first get a quote for merchant accounts, some fees may seem a bit confusing. Take the time to go through your application and ask questions about the fees you don’t understand. Taking the time to go through the fees may prevent unpleasant surprises when you get your first merchant statement. Remember, a quote is not the same as a statement of fees. Many quotes do not list all possible fees, so make sure to do your homework and get the statement of fees.
Contracts & Cancellation Fees: Before you even set up a merchant account, ask for details on how you would go about canceling. Is there a termination fee or time commitment? Some processors may have contracts for their merchant accounts that automatically renew if you don’t give written notice more than a month before your contract expires. Also, beware of claims such as "even though you have a fee in your contract, we never charge it." Not all processors require a contract, so unless there are some special circumstances, it is usually best to go with a company that is flexible and doesn’t require you to make a long-term commitment. Think of it this way: if you can cancel your merchant account at any time, a good company will work hard to keep you a satisfied customer.
Customer Support: Many companies use the same employees for sales, account service, and technical support, or worse, don’t even have an internal support staff. A company that has dedicated departments for each will be able to offer you expert help, whether you have questions about your statement, or need to get your terminal back up and running in a hurry. A processor that offers 24 hour support will be there whenever you need them, meaning you won’t be at the mercy of someone else’s business hours. 24 hour support is also a good indicator of the company’s commitment to its customers beyond the application process.
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