Merchant accounts are contractual agreements between a participating bank who extends a line of credit to a merchant. This allows businesses to accept payment for goods and/or services from credit cards.

You should know that customers are far more likely to buy from businesses that offer the option to pay with credit cards. Statistics prove that vendors using merchant accounts will see an immediate increase in the number of sales. While the average cash sale is around $9, the average credit card sale is closer to $40.

No matter what type of business you own, the availability of merchant accounts can help your cash flow in several ways. Here are some of the benefits for using merchant accounts:

- Having credit card facilities means you can offer customers the option to purchase on the spot.

- Merchant account processing fees are frequently lower than check transaction fees.

- Debt collection problems becomes an issue for the bank, not you.

While there are some definite benefits to having a merchant account facility for your business transactional needs, there are also some drawbacks to think about.

- You will need to protect your business against instances of credit card fraud.

- Your policies about charge-backs and refunds may need revising in order to minimize damages.

- If you accept credit card payments via your website, be certain youre using fraud protection measures to minimize scams, thefts and fraudulent charges

Instituting Merchant Accounts

Setting up a merchant account is often a relatively simple process. A company bank account will be needed for deposits from any credit card purchases. You’ll need to also lease processing equipment and/or software in order to process transactions.

If you’re planning to process credit cards via your company’s website, then you’ll need to register with a payment gateway like VirtualNet or CyberCash. You should also make sure that the merchant account software you’re using will be compatible with your online payment gateway.

Merchant Account Comparisons

Before you call up your own bank and ask them for a merchant account, take a little time to compare the facilities offered by several different banking institutions, in addition to merchant account vendors. The fees and charges associated with accounts can vary drastically, so always check what youre being charged and what fees are likely to come into effect per transaction as well.

An example of fees could include initial start -up costs, monthly equipment lease fees, transaction fees, processing fees and even sales volume costs. Ask your merchant account provider to supply you with a written list of all fees so you can compare with other lenders accurately.

Merchant Account Charges and Fees

Many providers will charge some kind of application fee. It can vary from $0, all the way to $100 or more, depending on the lender.

You may also need to purchase your software, which can range in cost around $100, or more. Once this software is installed, its possible you may have to pay a licensing lease on the software, which can range from $20-$50/month. Again, this depends on your lender or merchant account provider.

In addition, you will incur transaction fees that can range from $.20-$.50 per transaction. While this doesn’t sound necessarily high, this can really add up if you process a large number of transactions.

Other fees you want to make sure you ask any potential merchant account vendor include charge back fees, statement fees, minimum usage fees, annual fees, account keeping fees and close out fees.

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