The Merchant Account - What It Is and Why You Need It

mer·chant / noun 

1. somebody who buys and sells goods, especially as a wholesaler or on the international market
2. somebody who sells products at retail, especially in a store or other outlet

For anyone going into business for the first time, the entire process can be daunting. So for the sake of keeping this simple, let's pretend that you consider yourself to be a merchant and you already have your business ready-to-go except for the way in which you will process payments from your customers or clients or for your services. Hmmmm. This one piece of the puzzle is without doubt, the most important part if you intend to pay your bills! A merchant account allows you to process payments from debit cards, credit cards, gift cards and checks. It is a line of credit in that it is a commitment that you, the merchant (retailer, wholesaler or Internet provider) will routinely settle all transactions processed by the merchant bank (your designated bank) along with a payment processor (such as VISA or MasterCard). This means that you are partners in running your business. The good news is that whether you are starting a brand new business or even if you're a seasoned business owner, a merchant account provider can complete a full-scale analysis of your business and then provide a total solution for your specific business needs.

Merchant Account Solutions Include: 

1. Retail (POS point of sale)
2. Moto (pay-at-the-pump)
3. Wireless
4. eCommerce
5. Online Retailers
6. Check Processing
7. ACH (Automated Clearing House)
8. Phone & Mail Order
9. Restaurant
10. Hotel/Lodging
11. High Volume Processing

So you ask what appears to be a simple question, where can I find someone to help me with setting up a merchant account? It sounds easy but when you go online very few companies actually explain everything, they just want you to buy their system, services and equipment. A friend recently told me how she has two payment processing machines for which she pays $60 each month but cannot use because she changed her processing partner and the new provider can't program her existing machines. Obviously, it's good to know what questions to ask in the beginning to avoid that issue. In addition, you really want to find one provider that can fill all or most of your financial needs. So a few things you want to know are:

1. How many services do they offer?
2. Can you get advances on your credit card sales?
3. If yes, what percentage will they take out of future sales?
4. Is there also an extra fee for doing that?
5. What percentage or fee do they take out of each transaction? (Usually when merchant processors refer to discounts they are talking about the money that they take out of each of your sales. It's not a lower processing rate.) Ask them to clarify each and every fee.
6. Do they charge a transaction fee even when a transaction is not completed?
7. How much are they charging per month to lease their equipment to you?
8. Is the equipment proprietary equipment?
9. If yes, then can it be reprogrammed later if you change your processing company?
10. Is there a termination or early termination fee?
11. You may be wise to as them what are all of their fees!

Credit Card Processing Methods

The majority of credit card transactions are processed electronically by merchant processing banks for authorization, capture and deposit. The first one that I remember is the Automated Clearing House (ACH), a nationwide electronic funds transfer (EFT) system that clears credit and debit transactions for financial institutions that are a part of their program.

Credit Card Terminal

A credit card terminal is a stand-alone piece of electronic equipment. The merchant swipes or enters credit card information to process transactions.

ARU

An ARU (voice authorization, capture and deposit) processes credit card authorizations using a cell phone or land line phone. A merchant places a credit card slip with carbon paper or carbon-less paper and the card into the imprinter then slides the handle so the credit card number prints on the paper slip. This creates a receipt and a copy, and it processes the transaction over the telephone. All in one swell swoop!

Payment Gateway

A payment gateway is an eCommerce service that authorizes payments for eBusiness and online retailers. It is a form of the POS (point-of-sale) terminal in retail stores.

How Do I Get A Merchant Account?

Merchant accounts are usually marketed in two ways: 

1. Directly by the processor or sponsoring bank, or by an authorized agent for the bank
2. Directly registered with Visa and MasterCard as an Independent Selling Organization/Member Service Provider (ISO/MSP)

Today, there are many companies that provide merchant services so you really need to do your homework before you make a decision about your payment processing system. Compare fees, services and customer service...take a big view approach and you will be on your way to setting up your merchant account and processing sales in no time.