Merchant Accounts

What is a merchant account? Where can I get the best rate merchant account or the lowest fee processing? Can I process credit card transaction without a merchant account?

Bussinesses that want to accept credit card payments from their customers need a merchant account.

A merchant account is a line-of-credit that a bank provides for a business to process their credit card payments. The bank is usualy referred to as an acquirer.

The merchant account allows the credit card payment to get routed from cardholder (the customer) to the merchant through the banking network and directly deposited into the merchant's business bank account.

Banks usually have agents or sales organizations (often referred to as Independent Sales Organization or ISO for short). These ISOs will represent a bank or sometimes represent themselves but provide (sell) merchant accounts that are facilitated by banks.

The terms acquirer (Acquiring Bank) refers to the banks underwriting department acquiring the debt or potential debt for a business, hence called an acquirer.

The rates and fees for merchant accounts could vary drastically depending on whether the ISO add a % to the banks normal fees or not. But lowest merchant account rates are about 1.95% for Internet merchant accounts, mail order, and telephone order processing. The lowest merchant account rates for retail, hotels, travel, stores, restaurants, and grocery stores are about 1.09%.

In addition to a merchant account, a merchant needs to also get a payment processing service that allows it to take payments from customers and process the transaction through the banking networks and obtain the funds.

Most home-based businesses have Internet merchant accounts and use merchant account with a payment processing in order to get payed by their customers for goods and services.

High-risk businesses, such as gambling sites and dating sites, use a third-party payment processor. These usually have rates as high as 30% of transaction and have a variety of confusing fees and often hidden fees. But the most customer complaints seem to be the indiscremenant rate increases and the sudden freezing of funds and placing it on a reserve for 6-months.

Some third-party merchant account provides have been known to put accounts on fund hold and use the funds to provide partial financial underwriting with the banks they represent and that is how they get a higher portion of the fees - at the expense of businesses that have their desperately needed cash-flow on hold while the merchant account provider is benefiting from their revenue.

Third-party merchant account industry is not properly regulated in our opinion. We have had customers in tears on the telephone complaining about other companies and their unethical practices. We only work with bank that are reputable and merchant account providers that do not take part in fund reserve usage for underwriting strategies to increase their own revenue.

Accepting Credit Card Payments

Where do I start to get ready for taking credit card payments from my customers?

You will need two things: 1. Merchant Account; 2) Transaction Processing service. If your transaction processing service does not include a shopping cart software (most do provide that these days) then you will also need an electronic shopping cart software.

Your merchant account should be from a bank that offers the latest security for transaction authorization, processing, capture, and fund settlement. Such a bank should also guarantee that they will transfer the funds into your business bank account without 24 ot 48 hours. Your merchant account would be ideally on the latest banking network infrastructure to avoid compatibility problems with your processors and your shopping cart in order for your orders to accept security features such as AVS and CVV2 and so that you can sell any product or service type of your choice, for instance shipped goods, subscription membership based products or services, digital goods and instant delivery upon payment confirmation.

Transaction processing will incude all the security features, payment gateway servers, encryption, database, management, marketing analysis tools, and may be even more. Ideally, capable to do multiple product types in each transaction (ie. selling both a CD and also a downloadable file on the same shopping cart in the same order). Additionally, shipping calculations and tax rate calculation as well as user accounts for convenience are required. In most cases, a virtual terminal is also needed.

If the transaction processing does not include an integrated shopping cart software, then you will need a shopping cart also to process your orders. Make sure that this is compatible with the merchant account and the processing service you are using.

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