Credit Card Merchant Accounts

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If you sell anything, online or in a brick and mortar store, you really need to accept major credit cards. Few people carry much cash these days, and check fraud has become so widespread that many merchants have stopped accepting checks altogether. Most business make the majority of their sales through credit and debit cards now. Here's the scoop on getting a merchant account for your business...

get a merchant account

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 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.

Do you have something to say about merchant accounts? Post your comment or question below...

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Most recent comments on "Credit Card Merchant Accounts"

Posted by:

Zeke Krahlin
07 Jun 2010

In my city, I see many small restaurants--typically, Chinese--with signs on their windows that state "cash only". I doubt their profit margins are low, as a result of not accepting credit cards. Else, they wouldn't be in business. Or do you think they are money laundering; or worse, perhaps such restaurants are a front for some sort of crime operations?

EDITOR'S NOTE: My best guess would be they don't like paying income taxes. Credit cards and checks leave an audit trail...

Posted by:

07 Jun 2010

There is also the option of using paypal, which doesn't have any paperwork and people can pay paypal with a credit card. I use it all the time.

Posted by:

08 Jun 2010

Costco also offers merchant accounts through a partner (Elevon) with good rates and waived fees for Executive Members.

I don't even carry cash anymore and find paying by check to be too much of a hassle. Online bill pay and credit cards are the only way to go.

Posted by:

08 Jun 2010

Here in the UK, credit and debit card machines don't generally print the card number in full - it's usually shown as a line of asterisks plus the final 3 or 4 digits, e.g. "**** **** **** 1234".

This prevents the type of crime described in Bob's article, where a thief picks up a discarded receipt and gets the card number.

Posted by:

08 Jun 2010

There is a new iPhone app that allows anyone with an iPhone to take credit cards (they may have an app for other phones too). I haven't tried it yet but it seems very reasonably priced and easy to set up. Here is the URL"

Posted by:

15 Jun 2010

Be careful. Check out whomever you go with the BBB first. My business was legally dissolved and I was forced to pay for a unit I never once used for 4 years. Bank account was closed; everything... company would not let me out of contract. I would never go that way again.

Posted by:

15 Jun 2010

As a merchant, I paid $25/month for a processor, plus 1.7% on transactions, no transaction fees. And I was a small, one-person company. Far from "costing" me money, accepting credit cards actually increased my revenue. Presumably, for the following reason:

As a consumer, I've been carrying the same $20 for over 5 years now. This is the 21st century. Any company that doesn't acccept cards also does not want my business, apparently. That DOES cost them money, no matter how they may think they're saving it.

Yes, there was an early termination fee if cancelled out within the first two years, a maximum of $300. Not a killer, but also one of countless good reasons to incorporate. The processor would then have to collect from the dissolved company.

Posted by:

Ryan James
15 Jun 2010

I tried using PayPal for our Bed and Breakfast in Budapest, Hungary connecting with our CA bank when I wanted to move money.

The learning curve for those who did not know how it worked was horrendous. Although people were told they needed to create an account before leaving home, I had a number of them who tried creating one from here on the morning they were checking out. Needless to say, they had to rush off to the ATM machine.

Regardless of how much preparation information you give, they just don't pay attention. I gave up and quick taking PayPal.

Posted by:

11 Oct 2010

Be very careful when opening a merchant account as things are rarely what they seem. I blog about this and seemingly grate rates from costco:

Posted by:

11 Oct 2010

Sorry the blog is

Posted by:

02 Mar 2011

Square, get your free card reader in the mail, and start swiping. Accept all credit cards. No hidden fees, no commitments—ever.

Available for iPhone, iPad, and Android
Not for everyone, but free to sign up no monthly fee and the small dongle that plugs into Ipad so you can swipe the card is free. The merchant discount is 2.75% You can also manually enter cc information ,I think that manual entering cost a little more on merchant discount Merchant discount is the % you pay as a merchant to use this service . I am a plumber and use this service

Posted by:

27 Apr 2011

Be very careful when opening a merchant account as things are rarely what they seem.

Posted by:

Esmeram L.
18 Jun 2011

Government officials, stores and banks are having a massive row over interchange costs on debit and credit cards. Companies are getting fed up with paying banks to get money they are owed, which they have to pay due to interchange fees. I found this here: Merchants moving away from debit and credit cards

Posted by:

30 Jul 2012

Dear Bob,
We love you as a most important member of our family. Every single question that we have is answered by your website and by your books. We cannot imagine our performance in business and on the internet without your wise guidance.
We are very happy to have you in our lives!!!
Eat healthy, wear a seatbelt and do not text while you are driving, Kindest regards, Franklin family.

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Article information: AskBobRankin -- Credit Card Merchant Accounts (Posted: 4 Jun 2010)
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