Merchant Accounts

If you have a web site that offer goods and services you better be able to accept credit cards as payment. If you don't you are severely limiting your ability to process sales.

Having a merchant account as a business that does its business on the web is pretty much an industry standard. From my experience at Total Hosting   anywhere from 65% to 100% of our business is processed through our merchant account. The bottom line is that customers are most comfortable with using a credit card to process their transactions. It does not matter how good your product is or how good of a job you do advertising your service, if you do not accept credit cards, customers will go elsewhere.

Merchant accounts are fairly easy to set up. Essentially you partner with a merchant company or bank. They are the tool that joins you to the credit card companies, namely Visa, Mastercard, American Express and Discover.  Once you are set up, the merchant company processes the credit card transaction and moves the sales into your designated account. Pretty easy, right? Yes well the process itself is easy. Choosing a merchant account provider, the application process, and transactions fees is what will require your close scrutiny.

First you must find a Merchant Service provider. There are many of these providers out there.  If you are and online business, there are merchant service providers that specialize in this type of business. These online merchant accounts need an online "gateway" in order to accept credit card transactions. This "gateway" is essentially your credit card "swipe" machine and you will need to ensure that it is compatible with the shopping cart that you use on your site. 

How much and what kind of fees you will be charged is something else to consider. Firstly, the merchant account provider will charge a transaction fee for each credit card you process. These fees vary depending on the merchant company you choose, what type business you are in, how long you have been in business and how many credit card transaction you are doing each month. You also need to consider that fact that each of the credit card companies charges you a fee for using their service as well. This is usually a percentage of the total amount charged in each batch of charges that you process. Remember that deeply discounted fees are not always the right way to go. You need to consider all of the fees, of course, but the reason you are accepting credit cards is to get more money into your account.  If you chase unusually low fees, you may be partnering with a less than reputable merchant service and in the end will cause yourself problems.

Lastly, once you have established your merchant account relationship, you need to keep it in good standing. Protecting yourself from fraudulent transactions is part of the deal when you accept credit cards. The merchant account service provider you choose should provide security tools as part of their service. One these tools that is used for Visa and Mastercard transactions is AVS or Address Verification Service. Essentially, in order for the transaction to be approved, the address information that is being provided as part of the purchase, needs to match the information that the credit card company has on file for that cardholder. When fraudulent transactions make it all of the way through, you often learn about them via a chargeback. Chargebacks are claims by the legitimate cardholder that say that the charge posted by your company was not made by them. Now it is hard enough to research and dispute these chargebacks when the customer is right in front of you with their signature on a slip of paper. It is even harder when the transactions are virtual and you never even see the customer. All chargebacks need to be addressed and resolved. Too many chargebacks against your account and you will be deemed "high risk" by the merchant account provider. If that happens they or even the credit card companies themselves will no longer choose to do business with your company.

Even with all of the things that you need to consider in order to take credit cards as part of your business, the decision is a no-brainer. Credit cards are what the customer prefers to use when making their purchases, whether it be in a store front or online. Credit cards, you won't be in business without them.

To learn more about processing credit card transactions please read:

New lower merchant account rates
Offer Authorize.Net Merchant Accounts to Your Clients!

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