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Merchant accounts are contracts between an acquiring bank that extends lines of credit to a merchant, and that allow businesses to accept payment for goods or services via credit cards.

Did you know that customers are more likely to purchase from businesses that offer credit card facilities? Statistics show that businesses using merchant accounts can see an immediate increase in the number of sales. These statistics are based on the average cash sale being only $9, while the average credit card sale is approximately $40.

Regardless of the type of business, the availability of merchant accounts will definitely improve your cash flow in several ways. Below are some benefits for using merchant accounts:

- Having credit card facilities means you can offer customers the option to purchase on the spot.

- Processing fees for merchant accounts can be lower than check transaction fees.

- Issues about debt collection will become the bank’s problem, not yours.

While there are obvious benefits to having merchant account facilities in your business, there are also some drawbacks to consider.

- Its important that you protect your business from credit card fraud.

- You may need to examine and possibly revise your policies concerning charge-backs and refunds to minimize damages.

- If you accept credit card payments via your website, be certain youre using fraud protection measures to minimize scams, thefts and fraudulent charges

Setting Up Merchant Accounts

Setting up a merchant account is often a relatively simple process. A company bank account will be needed for deposits from any credit card purchases. You’ll need to also lease processing equipment and/or software in order to process transactions.

If you’re going to be processing credit cards through your company’s website, you’ll need to register with a payment gateway like CyberCash or VirtualNet. Make sure that the merchant account software you’ll be using is compatible with your online payment gateway.

Comparing Merchant Accounts

Before you call up your own bank and ask them for a merchant account, take a little time to compare the facilities offered by several different banking institutions, in addition to merchant account vendors. The fees and charges associated with accounts can vary drastically, so always check what youre being charged and what fees are likely to come into effect per transaction as well.

For example, fees could include initial start-up costs, monthly lease fees for equipment, transaction fees…even sales volume costs and processing fees. Ask any potential provider for a written list of all the fees you’ll be charged so you can compare them accurately with other vendors.

Merchant Account Fees and Charges

Different providers may charge some type of application fee. This can range from $0 up to $100, sometimes more depending on your lender.

You will also need to pay for your software, which will have an initial cost of around $80-$100. Once the software is installed, you’ll then have to pay the licensing lease on the software, which could be anywhere between $20-$50 per month. Once again it depends on your lender.

In addition to these, you will also incur transaction fees that can vary between $.20-.50 per transaction. While they don’t sound necessarily high, remember if you process a large number of transactions, this can add up.

Other fees you want to make sure you ask any potential merchant account vendor include charge back fees, statement fees, minimum usage fees, annual fees, account keeping fees and close out fees.

David P. Montana has been a renowned industry expert, business consultant and author in commercial collection agencies and other business services for thirty years. Read additional helpful tips and resources, including negotiating tactics, and important red flags and pitfalls to avoid when considering merchant accounts.

categories: merchant accounts,credit card processing,credit cards,business,finance,business services