What is a Merchant Account?

When a company decides to accept credit card payments from its customers, it must set up a Merchant Account with a bank that has a processing agreement with Visa and Mastercard or obtain an account from an ISO/MSP (Independent Sales Organization/Member Service Provider).

A Merchant Account allows a company to accept customer payments at a credit card terminal or electronically and have the funds delivered to a corporate bank account. In return, a company pays a per-item or percentage basis fee to the merchant account provider.

Why is a Merchant Account important?

Merchant accounts make it possible to accept credit card payments, which is a widely used form of payment for goods and services in countries around the world. When dealing in sales and services, it is important to have a merchant account so that you can give your customers a variety of payment options, which increases the ease of working with your company and provides a level of customer service that your customers may expect.

Businesses that do not have a merchant account run the risk of turning away customers that prefer to pay for goods and services with a credit card.

How should a vendor for Merchant Account be selected?

When looking for a merchant account vendor, it is important to consider the percentage and fees that the vendor charges in order for you to have an account. Generally, a vendor will charge a monthly or annual fee for use of its services. In addition, the vendor generally charges a percentage from each transaction, which is usually between two and four percent.

Next, make sure that you select a merchant account vendor that has a reputation for reliability. Many banks and lending institutions have established merchant accounts that you can trust. However, there are also independent merchant account vendors that may provide questionable reliability. One of the best ways to check the reliability of a merchant account vendor is to check their reputation with the Better Business Bureau. It may also help to perform a Google search for complaints against the particular merchant account vendor prior to entering into a contractual agreement with the vendor.

There are some other considerations that you should keep in mind when searching for the right vendor, including the following:

• Statement Fees - Does the merchant charge a fee for providing a monthly or annual statement to you?
• Monthly or Annual Minimums - Is there a minimum amount of money that you need to charge each month? What are the penalties if you do not charge this much money each month?

• Technical Support Availability and Pricing - Is there a fee to speak with a technical support team member? Are customer service representatives available when you need to speak with them to answer a question?

• Credit Card Terminal Costs - Will you or your clients be charged a terminal fee for each transaction at a credit card terminal? If so, what is this fee?

• Real-time Solution Price - If you require fast service for credit card processing, is there an additional charge?

• Ease and Price of Installation - If you are using a credit card terminal or software application, is there a charge to install the technology? Are there additional fees based on usage? Can you return the technology if you decide not to use it?

• What Technology Options are Available? - For transaction processing, accounting, customer relations, and more.

Additional Resources:

• Wikipedia information on merchant accounts:

http://en.wikipedia.org/wiki/Merchant_account