A Merchant Account is necessary to be able to accept money from credit card purchases. Ecommerce merchant accounts can be gotten from most banks and many other financial institutions. A Merchant Account is a relationship you have with a bank. The bank agrees to allow you to charge people’s credit cards for goods and/or services you provide. The bank in turn, has the responsibility for debiting the funds from the customer(s) and depositing it into your account. When you acquire a merchant account from a bank, you are expected to uphold your promises to your customers by fulfilling your end of the business transaction in a timely manner.
There are charges for a merchant account that may vary widely from one bank to another. You will definitely want to do some comparison-shopping before deciding on a merchant account.
Merchant accounts for an Internet only business may be more difficult to get. Internet anonymity is both a blessing and a curse. Anonymity is blessing to users who just want to satisfy their curiosity. But, banks and financial intuitions are usually pretty conservative and are leery of doing business where the merchant never meets the customer, no signatures are collected and no physical credit card is presented. So, banks tend to see anonymity as a curse because it can provide an entry point for fraud. Therefore, an internet only business will be charged considerably more for a merchant account than a brick and mortar store that also sells their products on a web site.
There are several fees involved with setting up and using a merchant account, such as:
Which One Should You Choose?
Bank or Financial Institution
The disadvantages to having your own Merchant Account with a bank are:
Third Party Processors
The disadvantages to having your merchant account with third party processors are:
For the totally Internet business a third party processor (also called an independent billing service) may be a better choice for obtaining a merchant account. Most of these companies have more lenient requirements than banks.
Should you opt for smaller monthly fees and higher transaction fees? Some business owners would rather pay a large up-front fee and not be bothered by monthly fees while other prefer the smaller monthly fees. Considering the complexity of merchant accounts, it might be cost-effective to hire a financial consultant with experience in obtaining merchant accounts to help you select your provider if you are new to accepting credit cards.
Are You Considered a High Risk Business?
It is usually best for a high risk business to use a merchant account provider to obtain a merchant account for you. They will know any necessary fees or cash reserves needed to obtain these types of accounts. A good merchant account provider representative will already have a relationship with financial institutions willing to accept high risk businesses and will be aware of all the hurdles you will face in obtaining a merchant account and be able to guide you through the process.
You can expect discount rates and transaction fees to be as much as two or three times as higher than other businesses. But don't worry, you can still get a merchant account.
Click here for information on two shopping cart providers that can help you get a merchant account that can be used both off and online.
Business Resource Center 2004 - All Rights Reserved
Site designed and maintained by DPW Enterprises