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Do you accept credit cards? This is a common question for online store owners. If you accept credit cards, you have earned a new customer. If you don't accept credit cards, it's highly possible a potential customer just clicked to a competitor's shop.
Is choosing a credit card merchant account provider the right design for your e-business?
Accepting Credit Cards with a Merchant Account worth the Money?
With 85% of online transactions processed with credit cards, it makes sense to sign-up for a merchant account. Why do some small businesses hesitate? Expense and confusion.
Not accepting credit cards will most likely cost you more than the merchant account. While there are discount rates, statement fees and transactions fees, business must take into account the losses incurred from non-payment, late payment due to invoicing and the lost revenue derived from potential customers who choose to shop elsewhere.
Cash flow becomes less of an issue when small businesses accept credit cards online. Instead of sending invoice terms of 30, 60 and 90 days, most credit card merchant accounts push funds to your bank account in 3-5 days. The faster cash infusion can be a big relief form small businesses working under a tight cash flow.
Is accepting credit cards right for your business?
Not all small business ventures should accept credit cards. Perhaps you sell high ticket merchandise- you may find that the discount rate of 2.3% is too expensive to justify the expense. Firms enforcing credit checks for expensive items may also wish to invoice customers
Types of Merchant Account Providers
One of the most confusing aspects of accepting credit cards online is finding a merchant service that will properly manage your account. Further complicating matters, there are many types of companies offering credit card solutions, and each company has unique pricing guidelines. It is appears as if you are comparing apples to oranges when shopping for a merchant account provider.
There are several organizations you can turn to:
Third Party Processor
Third party processors handle the processing of credit cards. Third party processors take care of many aspects of the transaction process such as authorization, billing, reporting, and settlement.
Bank
In an effort to be a one-stop solution for small business, most banks offer credit card services. Most banks do not handle the processing of credit cards. The majority of banks outsource credit card processing to a third party processor.
Independent Sales Organization (ISO)
ISO's are registered credit card merchant brokers. ISOs set up and service merchants, but do not perform credit card processing. Independent agents called merchant service representatives (MSRs) also resell the ISO's offerings.
Financial Service Provider
A financial service provider such as American Express and Discover provide merchants the option of directly applying for a credit card merchant account. Other major companies such as MasterCard and Visa require merchants to establish a merchant account through a third party intermediary.
Merchant Account qualification for Small Business
High incidence rates of fraud and charge backs have a huge impact on merchant account qualification.
 A charge back is a procedure performed by a consumer that reverses a sale that was credited to the Merchant's account. Charge backs occur due to several scenarios- the result of an error made by the cardholder's bank, a misunderstanding by the consumer, or fraud. After a charge back occurs, the merchant account holder is responsible for providing proof that the goods or services in question were delivered to the customer. Tangible products are generally better protected against charge backs compared to services.
When calculating risk, Merchant Account Providers also consider the type of credit card transactions being performed. "Card present" transactions that allow merchants to swipe credit cards and obtain a signature are considered to be less risky than "card absent transactions" that take place by phone, by mail or over the Internet.
When applying for a merchant account, your provider will perform a mandatory background check. They include a thorough credit history review of the owners or officers listed on the application, in addition to credit references from two to three suppliers.
Finally, if you have accepted credit cards in the past, providers will require previous merchant statements to better gauge your charge and charge back volume.
Customer Service
The best way to learn about a provider's level of customer service is to obtain customer referrals from current clients. Make sure to request merchants that are comparable in size and industry.
Ask questions: Do these merchants have to wait several minutes before reaching a customer support rep? Are their needs serviced quickly?
Buying Tips
Learn how long it takes for funds to be transferred
Providers differ on how long it takes for funds to be deposited to your account. You'll want to specify whether it is a retail or MOTO transaction, since MOTO transactions usually take substantially longer to clear.
Find out about reserve funds.
If you are a start-up or high-risk company, ask whether you will need to build a minimum reserve prior to being accepted.
Compare variable fees.
Check on fees that tend to vary between providers and may be negotiable. Such fees include set-up, cancellation, and monthly minimum. |
