Support > Merchant account essentials
Merchant Account Essentials
We are becoming increasingly dependent on the credit cards (plastic). We are developing into a cashless society at such a rapid pace and in in the 2004 Federal Reserve Payments Study, non-cash payments (payments using either credit or debit card) increased from 33% in 2000 to 43% in 2004. Furthermore, a whopping 80% of U.S. households have at least one credit card. These facts make it vital for businesses to accept credit cards. If you're running a business - whether it is a internet e-commerce enterprise or a small candy store down the street - and you need to accept credit cards, you must have a merchant account.
What is a Merchant Account?
It is an account that you set up, either with a bank or a third-party merchant account provider, authorized by credit card companies and that enables you to accept credit cards whether through a physical (face-to-face) transaction, over the phone or on the Internet.
How does it work?
When the customer orders or purchases goods from your store and pays for it using a credit card the merchant account provider processes the transaction and determines if the credit card information is correct and if funds are available. If they are, the funds are transferred to your account and after deducting the processing fees, the funds will be deposited to your personal or company bank account.
How is a Merchant Account established?
Before you sign up for a merchant account, you should shop around and settle for a merchant account provider that you believe will suit your needs. Consider where your needs fall. You probably have considerations that are different than the store next door.
- A company that is known local service.
- A company that provides one on one support when you have a need such as training on a terminal or an equipment issue.
- A company that provides the lowest processing rates.
- A merchant account provider who will give you free equipment for your location(s).
- A company that can work closely with you on your e-commerce integration and/or needs.
You can apply for a merchant account with a bank or an independent merchant account provider. The length of the application process depends on your type of business, your credit rating, and the method by which your customers pay you. A business wherein the customer is present during the credit card transaction is less prone to fraud and would take a shorter time to approve than businesses who receive credit card information through the phone or over the Internet. In any event, an approval for most business occurs on the same day that the application is submitted.
How soon will funds be transferred to your bank account from the merchant account after a transaction is settled?
Typically, the funds will be deposited to your bank account within 1 - 3 days.
What are the fees to be paid?
There are a number of costs associated with a Merchant Account. All merchant account providers require a transaction fee, which is a fixed amount that you pay for every transaction. The discount rate (or transaction processing rate) is the percentage of the amount paid by the customer which is charged to you. The discount rate is the highest cost item and should be the main basis for your cost comparison. The discount rate will have varying levels within an account depending on the type of credit card that a customer uses and the type of transaction (over the phone, on the internet, or in face to face).
Chargeback fees are those that you pay for transactions that were rejected usually due to fraudulent activities. Depending on the merchant account provider, you may also have other costs such as a monthly statement fee and a monthly minimum. It is best that you ask for a complete list of fees before signing up for a Merchant Account.
Most fees are negotiable. Always ask for lower fees, or better rates.
Have Questions regarding a new Merchant Account or online payment system? Contact Us Today at 888-215-9822 |
Have questions about our merchant accounts or the merchant account application? |
