Top 3 Things to Consider When Getting a Merchant Account

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One of my first successes online was the establishment of an e-commerce business which I ended up selling to the second largest power seller on Ebay at the time for roughly $250,000. Although I do not own any e-commerce websites today, it can be a lucrative model for anyone with direct access to a reasonably well demanded product at a rock bottom cost.

When operating an e-commerce business, selecting the right merchant account provider is important both from an operational and financial perspective. From an operational perspective, you want to ensure the merchant account you are using offers the features and functionality that will allow you to conduct business the way you want in the most streamlined fashion. In addition, built in fraud features are important when dealing with credit card payments.

Financially speaking, a merchant account can be a big drain on your bottom line profitability, and selecting one that offers the lowest rates, yet acceptable features and functionality, is likely the one you want to go with.

A merchant account is another term for a payment processing service for a business.  Unless you do all of your business in cash, you will eventually need a merchant account.

A good example of a basic merchant account is a PayPal account.  However, as you start to process credit card and debit card payments, you will need to upgrade to something more robust.

Who Needs a Merchant Account?

Any business, either online or offline, that wants to accept credit cards needs some type of merchant account.

Small businesses may want a merchant account to offer more convenient payment methods, especially credit cards and debit cards.

E-Commerce websites may want to keep payment processing in their own control, and having a merchant account allows that.  Also, you can simplify the checkout process by integrating your shopping cart with your merchant account to provide fast, secure transactions (most come with inbuilt fraud control features).

If you own a retail store or restaurant, a merchant account can get you a terminal so that you can actually swipe your customer’s credit cards, and speed up the checkout process.

Regardless of your business type, there are a lot of reasons to look at a merchant account.

Top Three Things to Consider

When looking at the top merchant accounts, you will see a lot of similarities and differences.  Here are the main criteria you should compare, and it will really depend on your business needs.

There are a lot of criteria that make up the cost of a credit card processing: type of business, type of credit card used, swiping credit cards vs. hand keying, processing volume, ticket size, and more.  Here are the top three things to look at.

1. Required Monthly Fees: Most merchant account providers do charge some required monthly fees.  Depending on the program, you may be able to get this waived.  Look for things like gateway fees and statement fees, or monthly minimums.  However, several new providers have started offering no monthly fee programs, so look around.
2. Transactions Fees: Most merchant account providers charge two different types of transactions fees.  The first is the discount fee, which is measured as a percentage of the ticket size being charged.  Of course, the lower this amount, the better.  Fees for this range from 0.38% to over 2%, depending on the type of card and transaction.  The lowest fees are charged when the credit card is present, since that is less risky to the processor.  Most companies also charge a flat fee per transaction, usually $0.10 to $0.30.  This is assessed every time, no matter what the amount is.
3. Features: Finally, you want to look at what fees the merchant account offers.  Do they offer a point of sale credit card swiper, do they have online connectivity to your e-commerce shopping cart, do they offer eChecks?  All of these are important questions to answer specific to your individual business needs.  If you only do online commerce, you don’t need a swiper, but you’d better make sure that it connects to your shopping cart.