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Things good to know when setting up a merchant account
Merchant account is an account with financial institution or a bank that allows a merchant to accept credit card payments. A bank that provides merchant account services is called merchant provider.
When paying with a credit card in an online store, a transaction goes thru series of steps. Merchant provider is an important part of this process and a big part of your business success depends on it. Nowadays, there is great number of merchant providers, offering variety of services. They differ by the type and location of services offered, fees, risk and business category, etc. Some known providers are: CreditCall, iTransact, ProPay, Soeasypay (you can find more names on http://en.wikipedia.org/wiki/Merchant_account_provider).
Choosing the merchant provider that is right for you should be thought through process that requires a lot of research. You should consider specifics of your business when looking for a provider; however there are several factors to take into account, common to many businesses:
- Online security. Since Internet-business is more vulnerable to credit card fraud than other forms of business, security should be first on the list. You would like your merchant provider to offer some kind of fraud protection.
- Services offered. Depending on the type of your online business, you might want to check the list of services offered by a provider: whether it accepts international transactions, or provides services for high-risk online industry (travel, ticketing, entertainment, etc.)
- Charges and fees. Rates charged to establish and provide a merchant account vary greatly on a provider. However, there are still several fixed fees, common to most account providers. Among those are:
- Application fee - one time fee, depends on a provider
- Monthly fee – to cover monthly services, can be up to $25
- Transaction fee – a fixed fee charged from any transaction independent on amount charged, usually between $.20 to $.50
- Discount fee – commission rate from a merchant’s earning on discount sales, usually between 2% to 4%
- Chargeback fee – charged when a customer asks for a refund and funds are credited on his credit card account, usually between $10 to $20. Some providers put a limit on a number of chargebacks allowed.
- Miscellaneous fees. Several other fees that may be associated with an account: annual fee, cancellation fee (most accounts request certain number of years of commitment, three is average).
- Other considerations. Is there a limit on the deposit amount? Are all fees and costs listed upfront? When are fees charged (during, before, or after a transaction)? Is this merchant provider trustworthy (you want to avoid providers that had a history of supporting porn or gambling online sites)? You can check Better Business Bureau to get a merchant provider rating.
Merchant providers will also let you know what is required from a merchant to open an account in their bank; e.g. business account, business or a reseller license, proof of a return policy, tax return document, etc. Once your account with a merchant provider is setup, you can start charging and processing credit card in your online store. Once credit card payment is approved, it will take about 2 – 4 working days for funds to be deposited on merchant’s business account.
