Merchant Services: An Overview for the Novice Business Owner
The success of any small business is deeply rooted in customer
satisfaction. A merchant account can help your burgeoning company expand
its consumer base by offering a new and versatile level of convenience
Merchant accounts provide a variety of services
based around the central ability to process credit and debit cards for
payment. In an ever bustling society of instant gratification, many
potential customers take the ability to pay with plastic for granted.
Take a few moments to learn the basics of merchant accounts with this
quick tutorial before you choose a provider for your small business.
Types of Merchant Accounts
are three basic varieties of merchant accounts, each designed to suit a
particular type of business in the most efficient way possible.
Depending on the kind of business you do most often, it may be a good
idea to opt for a combination of accounts to provide the ultimate in
Retail Merchant Accounts
merchant accounts are the most familiar type and have been around ever
since credit cards became a favorite payment method of the general
public. They are best suited to businesses that have a storefront or
other physical point of sale. Millions of customers take advantage of
the services offered by these accounts each day at grocery stores,
department stores, restaurants and more.
If you can perform at
least 80 percent of all credit card transactions with the card holder
present, a retail merchant account will provide the best combination of
flexibility and low rates. Since transactions of this type are deemed
the most secure, retail merchant accounts enjoy the lowest rates and
fees of the three types. Typical per-transaction fees tend to hover near
1.79% of each purchase.
If you decide to opt for a retail
merchant account, you’ll need to obtain a credit card terminal that lets
you swipe cards or manually enter information to process orders
immediately. These terminals provide nearly instantaneous results,
letting you know if the payment has been accepted or declined. They can
be purchased or leased from your merchant account provider.
Internet Merchant Accounts
of the newest and most increasingly popular ways for processing
payments, Internet merchant accounts let your business process credit
and debit cards instantly on the web. If you conduct the majority of
your credit card transactions via the Internet, you’ll reap the benefits
from this type of account.
The combination of an attractive,
informative website and a secure, easy to understand payment system can
be a boon to any web based business. While many larger companies have
the capital to develop their own custom online payment portals, most
businesses take advantage of a third party-run secure payment gateway,
which can be set up through your account provider.
potential for fraud is a bit higher for internet merchant accounts,
compared to retail accounts, their rates are usually a bit higher. In
general, you can expect a per-transaction fee around 2.3% for internet
accounts. The higher rate protects you and your account provider’s
interests in the event of illegal activity.
MOTO Merchant Accounts
is an acronym that stands for mail order – telephone order merchant
accounts. This type of account is the least common and lets businesses
defer processing of credit card for payment. Card information is
supplied by the card holder and then submitted to the merchant account
provider manually by the business via the web or telephone.
Merchant Account Providers
accounts are specialized bank accounts that can only be offered by
merchant banks. These are banks that deal solely with businesses, as
opposed to typical investment banks, which deal primarily with the
public. Businesses with a well established reputation and a good credit
rating may be able to set up a merchant account through a merchant bank
directly, but most choose to take advantage of the services of an
independent sales organization, or ISO.
An ISO is a company that
acts as a liaison between merchant banks and businesses and specializes
in managing merchant accounts of all types.
Although it may seem
counterintuitive to opt for a third party in your business’s merchant
account dealings, ISO’s offer an array of extra services the merchant
banks lack. Services offered by ISO’s typically include customer
service, equipment sales and leasing, printer paper supply and
There are many independent sales
organizations in the market today and it’s essential to carefully
compare several potential partners before committing to a contract.
Before you make a final decision, be sure your ISO has a proven track
record as well as proof of sponsorship by a reputable FDIC insured bank.
of the kind of business you run, a merchant account with a reputable
ISO or merchant bank can offer the convenience and security that current
and future customers will appreciate and use over and over.