Merchant Accounts: What to Look For, What to Ask and Why


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Accepting Credit Cards

As a small business or a small-small business (under 10 employees) it is important that you consider accepting credit cards if you don't do so already.  People expect to be able to pay with plastic.  They can pay with credit cards at fast food restaurants, gas stations, coffee shops and more.  It is just expected, fairly or not, that a business be able to accept credit cards.

The first thing you need to do is evaluate Merchant Acounts.  You may naturally assume that it is just easier to use your bank to set up your account.  Well, that is convenient, but is it really in  your best interest.

Many small businesses fall into the trap of latching onto their first merchant account and staying with them because of the convenience.  They do this to their detrement.  Over the past few years rates have lowered, while these small companies, out of loyalty or convenience, have been stuck paying the same rate they had when they first started.

Those of you familiar with credit card processing know that there are several fees associated with it.  There are several things you need to know
prior to associating with a merchant account provider:

  • Discount rate:  This is the percentage that the merchant account provider receives
  • Equipment: Terminals, printers, etc. ,
  • Monthly Minimums: Fees collected each month by the merchant account provider (usually waived if your transaction fees and discount rates exceed it.
  • Reserve Fees: If you are considered a High-Risk business you may have to set up a reserve account which is a way for the merchant account provider to proect themselves from losses.
  • Charge back fees: To cover charge disputes

These are all things you should ask about going into talks with any merchant account provider.

Once you have your account, you will need processing equipment.  Oh. . . I can here the groans now.  You can start out inexpensively with a phone and an imprinter, but you may find that you will receive more favorable discount rates by using electronic card processing equipment, such as those that allow you to swipe a customers card and authorize sales instantly.  They are more expensive, but will save you money in the long run.  One way to cut this cost is to set up your PC to authorize sales instead of a terminal.

Online merchant accounts are another consideration.  You will need virtual versions of the credit card processors described above:

  • Secure Gateway: This translates the information entered onto your website into data that can be read by an electronic card processing system.
  • Virtual Terminal: This eleminates the need for a physical point-of-sale card processing system.
In addition, these are some “nice to haves" that people have come to expect from online merchant accounts:
  • Online Shopping Cart
  • Encryption
  • Virtual check processor
  • Wireless terminals

Go into aquiring a Merchant Account with your eyes open.  It is a service that you will need if you plan on being competitive, so make sure you do it right.

Yolanda McDonald is Business Systems Analyst in Baltimore, MD. She has 15 years of experience in programming, design and analysis on several platforms including Midrange, Client/Server and the Internet. You can find more of her articles at .


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