Discover why Merchant Accounts are an Absolute Must in Today's Business World

Operating a business today that does not accept credit card payments is like shutting

your doors to about 75 percent of potential customers not something a smart business person would do.

Consider these statistics gathered from the Federal Reserve:

Almost 75 percent of all families carry a credit card; 51 percent carry at least two credit cards

Consumers in the United States have an average of four cards; 14 percent have more than 10 cards

In 2009, the median family income was $43,200 and their credit card balance was almost 5 percent of their annual income

Most families carry two bank cards

Those using a credit card without a rewards program spent about $465 a month. Families using a card with a rewards program spent about $890 a month.

These statistics show that most businesses must accept credit cards or debit cards payments if they are going to be able to compete in today's world. It only makes sense to open a merchant account so you can offer your customers the same conveniences offered by other businesses or your competitors.

A merchant account includes the software, hardware and support you will need in order to accept credit card payments for your products or services. A merchant account works like this:

You accept a credit card payment for your products or services. The merchant account is built upon a relationship with a bank or institution that agrees to pay you for a valid credit card transaction. It is on the bank or institution to collect the money from your customer. You have already been paid.

Credit card companies American Express, Visa, MasterCard, etc. work with merchant accounts because they collect their money from the bank or other institution. These credit card companies are assured they will get their money from the bank and do not have to depend on the reliability of the local business to pay them.

Here's how the merchant account works for you:

You swipe your customer's credit card or run the credit card number through your hardware.

The transaction goes through several steps that result in your customer's money being transferred through your merchant account and deposited into your business checking account.

You have the choice of accepting credit cards in either real-time or deferred processing. Real time processing runs the transaction immediately. Deferred processing allows you to take time to process the order later, which can be helpful when you need to be assured that you have the product on hand. Most companies prefer real-time processing when they are selling goods or services like online applications or information that need to be delivered immediately over the Internet. If you do not deliver products or services instantly over the Internet, deferred processing is a good way to go.

There are two other processes to consider with your merchant account: debit or ATM cards and e-checks.

Debit Cards

From the merchant's side, purchases using a debit card are processed just like a credit card. The difference is the funds come from the customer's checking account.

E-Checks

These are just standard paper checks, but they are processed online. Because it is online, you do not need the customer's signature but you do need the name of the bank that issued the check, the routing number and the checking account number.

The hardware and software that you need to accept debit cards is the same needed to process credit cards. But in order to accept and process e-checks, you need software that lets you print online checks. You then deposit the printed e-check into your bank and wait a couple days for the check to clear.

When it comes to choosing the merchant account that is right for you, there are three types to consider:

Retail merchant accounts will charge you the lowest fees per transaction, but they are often more restrictive than the others. Because the credit card must be presented and swiped, these accounts are best for businesses that have a physical presence like a store, hotel or restaurant. They cannot be used with deferred processing operations.

Mail order - telephone order accounts are designed for use by merchants who sell their products or services through the mail or over the phone. You enter the credit card information on a payment service provider's Web site. These systems will charge you a higher per-transaction fee than the retail merchant account.

Internet merchant accounts work similarly to mail order and telephone order operations, except that they are online orders. You will run the order on a virtual terminal or payment service gateway. Often these service gateways are included in the cost of business Web hosting packages.

Discover why Merchant Accounts are an Absolute Must in Today's Business World

By: Terry Gonzalez

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