In today’s rocky economy, it can be tough to make a go of many small businesses. When consumer confidence is low, retail businesses are often the first to feel the effects and end up being among the hardest hit as well. However, if you still haven’t set up a account, the many versatile services they offer could help attract new customers while retaining current buyers.
A account is a specialized kind of bank account that allows businesses to process credit cards to complete transactions. Although credit cards are partially to blame for current economic troubles, they continue to rise in popularity. Today’s average consumer takes paying with plastic for granted and often considers cash only policies to be a major inconvenience.
Merchant Account Providers
Since they are a special type of account, accounts are only available from two specialized sources. Businesses that enjoy a solid reputation and excellent credit rating may opt to apply for their accounts directly with a merchant bank. Merchant banks deal only with established and certified businesses and provide a number of other banking services in addition to providing merchant accounts.
Most businesses, however, choose to set up their merchant accounts with independent service providers, or ISOs. Sometimes these providers are also described as member service providers, or MSPs. ISOs are certified third party brokers that are sponsored and certified by reputable banks to offer merchant accounts.
ISOs offer many advantages over banks alone, including equipment sales or leasing, customer service, settlement management and back office services. However, the drawbacks associated with ISOs can include lots of fine print and extra service charges included in contracts. Keep in mind that an ISO is a for-profit business as well when dealing with them.
Before signing any agreements with a given ISO, be sure that you’ve researched competing providers well so that you get the best deal available. Additionally, scrutinize your final choice’s credentials well. Your final choice should be backed by a reputable bank that enjoys FDIC protection.
Kinds of Merchant Accounts
There are three basic varieties of merchant accounts available to businesses today. Each kind caters to particular types of transactions and carries its own associated fees and special considerations.
Some businesses who offer a wide range of services may find it in their best interest to opt for a combination of two types, depending on their sales trends. This basic run down will fill you in on what each type of account has to offer.
Retail Merchant Accounts best high risk merchant services
Retail merchant accounts are the most familiar and oldest type of account available. If your business operates from a storefront or another physical point of sale, chances are a retail account would best suit your needs. This type of account requires the purchase or leasing of a credit card terminal, which allows your employees to swipe customers’ credit or debit cards, thereby accepting or declining the card and payment instantly.
Retail merchant accounts are considered to be the most secure type of account and are much less prone to fraud or error than other types. This also makes retails accounts the cheapest of all. Per-transaction fees for this type of account generally hover around 1.8%. When you have a retail merchant account, at least 80% of all credit card transactions must take place with the card holder present.
Mail Order – Telephone Order Accounts
Mail order – telephone order, or MOTO, accounts are great options for businesses who deal with customers remotely, gathering credit card information either by phone or mail order form. Though once an extremely popular type of merchant account, MOTO accounts are increasingly being replaced by Internet based payment accounts.
This type of account is more prone to fraud and mistakes than the others since it requires your employees to enter card information manually. They’re also risky because the physical card is never present for the transaction, making these fees some of the steepest.
Internet Merchant Accounts
Internet merchant accounts allow businesses to accept payments on the web, via their website. Although larger companies often foot the expenses of creating a personalized payment portal, most small businesses enjoy the convenience of having their customers automatically redirected to a secure third party payment gateway when they are ready to pay.
Because customers must verify their identities as the card holder in several ways, Internet-based transactions are among the safest methods of payment available.