Credit Card Merchant Accounts

How Do I Get a Merchant Account?

To accept credit or debit cards for payment, you need what's called a merchant account. A credit card merchant account is an account in your business name opened with a credit card issuer, such as Visa. You accept customer's cards and electronically present their receipts to the credit card issuer. The card issuer deducts its fee from your receipts and deposits the rest in your bank account. Typically, those fees are about 2-3% of the purchase, plus a transaction fee of around 25 cents.

Why accept credit cards? The most important reason is that accepting credit and debit cards will increase your sales. Depending on your business niche, it could increase sales by 30% or more, simply because you've made it more convenient for people to pay you. You'll also find that accepting plastic increases the average order amount, and results in more impulse purchases. Having a merchant account also increases your business credibility. Fairly or not, people will assume that businesses who do not accept credit cards are less reputable.

It sounds wonderful and simple, but of course it can get complicated and difficult. First, you may need multiple merchant accounts to accept multiple kinds of cards. One merchant account will suffice for both VISA and Mastercard, which are sister companies. But there's also American Express, Discover, and Diners Club, to name the cards most commonly used. Each card issuer has its costs: application fees, setup fees, monthly minimum fees, and paperwork.

Merchant Account Providers

So where do you look for a reputable company that offers merchant accounts? If you search online for "credit card merchant account" you will find thousands of companies eager to help you get set up with all the major card issuers in one simple application process. Here are a few that I can recommend, because I've either dealt with them directly, or they've been recommended by a trusted friend:

iTransact offer merchant accounts and an internet payment gateway, which allows you to accept payment online. I've used this company since 2004 and the service is rock-solid.

Affinity Merchant Solutions is another company I've worked with to obtain a merchant account. They specialize in
helping businesses accept credit cards and other payment solutions; and offer friendly, personal, customer service.

Paypal Website Payments Pro is Paypal's merchant account and internet gateway all-in-one service. This is preferable to a regular Paypal business account, because you can integrate the payment processing into your own website.

Capital Merchant Solutions is noteworthy because of their very low rates, and no-charge integration with the Authorize.net gateway.

You can also ask about merchant accounts at the bank where you have your business account. Typically, though, banks will not give a good deal on merchant account to entrepreneurs and small businesses who want to accept payment online.

Qualifying for a credit card merchant account can be a challenge, especially if your business is new, involves long-distance sales, or is in any of many industries plagued by high rates of credit card fraud. Consumer electronics, computers, rare coins and stamps, pharmaceuticals, "adult content", and other popular merchandise categories may make your business too risky for some credit card issuers… unless you pay through the nose.

The fee charged to you on each credit card transaction depends, in part, on the overall riskiness of your business category, and on your business' actual history of disputed and fraudulent charges. New businesses, with no credit card history, are assessed higher fees; just like first-time car insurance buyers. Establishing a clean track record, free of disputes and charge-backs, can help you negotiate a lower transaction fee schedule after a while.

Ask about application fees; equipment leasing versus buying options; monthly base fees; per-transaction and percentage-of-transaction fees; penalties for charge backs; volume discounts; and minimum fees per transaction. The last item is a big sore point among small businesses.

How well you verify a customer's identity and document his purchase agreement has a lot to do with the credit card fees you will pay. A signed receipt is the gold standard; it's hard for a customer to claim he didn't make a purchase. Remote or "card not present" purchases are easier for fraudsters to wiggle out of. That is why many Web sites now require credit card payers to enter the CCV code on the back of the card; it's a three-digit code that a thief can't have just by fishing a paper customer receipt out of a trash can.

Credit card merchant accounts can seem like an expensive option if you look only at their cost. But they are a necessary business tool in today's economy. In spite of the fees involved, you should find that having a merchant account and accepting credit cards will utimately boost your bottom line.

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