What's Involved in Having a Merchant Account - Business

Online, it's a no-brainer. More customers will buy from you if you accept credit cards.

Customers have gotten used to instant gratification, and if you can't offer a way to make a safe, secure, and immediate transaction most of them will do business with someone who can.

It's true that you can accept credit cards without a merchant account, using online services such as Paypal. But these services require users to register, log on, and jump through many additional hoops.

Merchant accounts are the safest, most convenient form of online payment processing available. However, not all merchant accounts are created equally.

If you're considering merchant account services, you need to understand how online credit card transactions function, and how fees are typically structured. By knowing what to expect, you can find the merchant account service that best fits your situation.

One of the first things you need to understand is that a merchant account can involve several different services. Some business owners put together a patchwork of different service providers. But a one-stop shop, such as Ensight Merchant Services, can save you a lot of extra expense and confusion.

If you're a retailer with a brick-and-mortar store, you'll usually have a credit card terminal that links you directly to your merchant account.

However, in order to accept credit cards online you'll need a payment gateway and a service to integrate your gateway with your website, shopping cart, or whatever system you plan to use to accept credit cards online.

The payment gateway allows you to accept a customer's payment information, and also validates the information prior to sending it on. The information is transmitted to your merchant account itself, where the transaction is processed.

All of these services have to be seamlessly integrated in order for you to accept credit card transactions. That's why it's helpful to have a single merchant services provider who can handle it all for you.

Different merchant account providers charge different fees, which makes it hard to compare your costs without doing some heavy number crunching and a little bit of guesswork.

The fees you can usually expect to pay are an application fee, a fixed monthly fee, discount rates, transaction fees, termination fees, and miscellaneous fees.

Not all merchant account providers will charge you an application fee, and if you can find one that meets your other needs, this is a good way to reduce your startup costs.

On top of this, there's a monthly fee that's fixed, regardless of the number or amount of sales you make.

Your "discount rate" and transaction fee will vary each month, and they depend on several factors.

The transaction fee is a fixed amount that you pay every time you process a credit card transaction. The discount rate is a small percentage of each sale, usually two to four percent.

This rate assumes the most simple, low risk transaction. But sometimes you'll have to pay a higher fee for credit card transactions that are considered to be complex or risky.

Merchant accounts for retailers will usually get the discount rate. The sale is made in person, with the buyer physically present, so the risk is low.

Online credit card transactions are another matter. When you're setting up a merchant account to accept credit cards over the internet, be sure to ask if you'll qualify for the discount rate. It's possible you won't qualify, and will have to pay a higher rate.

Many merchant account providers have a termination fee. Be sure to ask about this before you sign on. Termination fees will tie you to a merchant service provider who may not be the one best suited to you.

There are many merchant services out there, and it's possible your first choice won't turn out to be your best choice. A termination fee just makes it more costly to switch, and it's usually worthwhile to avoid merchant services which charge one.

You should also be aware of miscellaneous fees such as chargebacks and refunds. You'll only have to pay these on rare occasions, but it's important to be ready for them.

It pays to give your selection of a merchant account some thought. For example, if you sell big-ticket items you'll usually be better off with a merchant account service that charges a smaller percentage of each sale, even if the fixed costs are higher. Likewise, for a new business that may start out slow, you'll probably prefer to keep your fixed costs down.

Starting a new business or expanding your current one can be exhilarating and exhausting. By knowing how the fees are assessed on your merchant account, you can avoid unexpected charges and make a smooth, profitable transition.