Merchant accounts are bank account for businesses that enables them to accept debit and credit card payments. It is an agreement between three parties (retailer, payment processor, and merchant bank) to settle credit and debit card transactions.
The process concerning the transfer of funds is simple. First, the payment will deposit into the merchant account. From there, they shift into the bank account owned by the business. This transfer into the business account can occur daily or weekly, depending on the merchant bank providing the merchant account services.
Getting a merchant account
Getting a merchant account is not that simple. There are a lot of factors that come into play when you are applying for a merchant account. Merchant account providers must minimize their risks. They look at a variety of things before approving your merchant account. Here are some questions that give you an idea of what information the bank will look at.
- Does your business have a high risk of credit card fraud?
- How long has your company been operating?
- Is there an event in your business’ history that is worth taking note of? (e.g., Bankruptcy, Default)
- Does your business have any other merchant accounts?
- How is your personal credit history?
It is easier to get approval for a merchant account from a bank that holds your business and personal statement.
If the answers to the questions above do not look favorable to you, your account may still be approved. However, the merchant bank will likely charge higher transaction fees as reassurance for their risk. That high fee can then be renegotiated later when the business has a better standing.
Internet merchant accounts
An internet merchant account is specifically used to hold and transfer funds that originate from online credit card transactions. These accounts usually have a higher fee than a standard merchant account as there is a higher risk involved in internet card transactions.
Internet card transactions include one more thing, a payment gateway that carries out the authentication of credit card information just like a POS machine does in a retail store. The payment gateway forwards the transaction information to the credit card company, which then authorizes the payment. Some merchant banks offer a solution that finishes the requirement of having a separate payment gateway.
You must know that you will need a separate internet merchant account for the different types of cards you want to accept. It is more convenient to get your internet merchant account through a third-party provider, including Moneris, PS iGATE, Internet Secure, etc.
The structure of fees
There are many different types of fees attached to merchant accounts. Some may be mentioned in the contract, and other expenses might not be mentioned. Here are a few that you should expect:
- Setup Fees
- Application Fees
- Discount Rate
- Monthly Fees
- Per Transaction Fees
- Credit Card Terminal Rent
- Cross Border Fee
Excessive fees might hurt your business margin, so comparing how much you will have to pay for your business’s merchant accounts is important. Also, carefully looking into merchant account contracts can help you avoid minimum term agreements which may require a penalty to be paid for cancellation.
Alternatives to merchant accounts
This service offers a complete solution for online transactions. You can avoid several fees if you use PayPal by only paying on a per transaction basis. You can use it to improve your margin, which gets smaller and smaller due to the extra fee associated with utilizing internet merchant accounts.
You can have a PayPal pay button placed on the checkout page of your website. You can also choose to use the Website Payments Pro option, which offers a more professional payment interface for your e-commerce website.
Credit card reader
These are devices that connect to your phone to carry out transactions. Offered by various service providers, they are ridiculously cheap (or even free) and charge a reasonable per transaction fee.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.