Merchant Accounts for Small Businesses

A merchant account is a business account that allows a small business to accept payments by credit cards.

Nowadays, even the most traditional types of small businesses have a web presence. With payment for virtual transactions using credit cards fast becoming the norm, the chances are that the vast majority of small businesses will benefit considerably from setting up a merchant account.

Failure to set up a merchant account to accommodate payments by credit cards is likely to result in buyers taking their business elsewhere, and those small businesses without a merchant account will inevitably suffer.

As credit cards are fast becoming the preferred method of payment, particularly in the burgeoning world of e-commerce, both medium and small businesses need to exploit this huge source of potential profit sooner rather than later. Ultimately, setting up a merchant account that accepts credit cards is the way forward for today's small businesses.

As fees and services vary considerably among merchant account providers, it is well worth small businesses exploring all the various options to determine whether costly add-on services are really worth the extra investment.

Another important factor to bear in mind about the different types of merchant accounts is the time lapse between payments being made by credit cards, using online order forms, and the payments by credit cards being deposited in the merchant account. Intervals may range from a few days to a few weeks.

The bottom line is shop around for the best merchant account deal available that suits your small business, and don't be afraid to negotiate terms and fees with your chosen merchant account provider.

The current proliferation of merchant account deals targeted at medium and small businesses makes it difficult to choose the type of merchant account that is best suited to your specific business requirements.

As a general guideline, all major US banks, including Bank of America, Wells Fargo, Chase Manhattan, KeyBank, and Citibank offer competitive merchant account packages. An increasing number of US banks also accept applications for merchant accounts from start-up businesses provided that they can supply a business plan that addresses the concerns of the merchant account provider.

Banks tend to exercise a more rigorous, low risk-based selection procedure for setting up merchant accounts for small businesses, whereas independent merchant account providers are more likely to tolerate a greater level of risk, in exchange for higher premiums.

When choosing a merchant account to allow your business to accept payments by credit cards, always try to compare similar account packages. If in doubt, consult your financial advisor who understands the implications for small businesses of the various types of merchant accounts.

To accept credit cards online, medium and small businesses have three main options for setting up a merchant account:

When applying for a merchant account, you will need to provide the bank or chosen merchant account provider with details of a typical order along with estimates of the average monthly payments you anticipate by credit card. Err on the side of caution when estimating anticipated volume of payments using credit cards as it is far easier to adjust figures upwards than have to explain the shortfall to an unimpressed merchant account provider!

All payments by credit cards are deposited daily in your merchant account by your merchant account provider with the agreed fees deducted. Certain merchant accounts also provide additional customer services, including real-time credit card authorization services where credit cards are either approved or rejected instantaneously during the purchasing procedure.

Once you have chosen your merchant account provider, you will be required to install payment-processing software to handle transactions made using credit cards. In effect, the software acts as a link between your merchant account provider and your credit card processing procedures.

You will need to redesign your website to include a simple order form for payments by credit cards. A word of warning about how you capture the necessary credit card information: Complicated data entry fields may end up alienating your customer!

In addition, it is important that the order form used to capture the information about the purchaser's credit card is held on a secure server.

A possible risk of accepting online paymets using credit cards is fraud, particularly for those merchant accounts that operate real-time credit card authorization procedures.

One way to reduce the risk to your small business of accepting fraudulent credit cards is to set up a merchant account that batches payments by credit cards and adopts off-line, manual, authorization procedures.