Understanding the Different Types of Merchant Accounts

When you are starting a business you will need to consider how you expect to process credit cards. This is done through a process called a merchant account, there are a variety of different accounts available and which will suit your needs best will depend on the type of business and physical set up you have available for you company. Gone are the days where business only accepted cash or paper check. We are now living in a virtual world where plastic is the way to pay. Your business will not have a chance of making it without accepting credit cards and obtaining a quality and consistent credit card processing account to do so. Depending on the type of business you run you may take cards physically in your location where the customer would actually physically swipe the card or you may obtain the information over the internet through your online webs store. No matter the type of platform you use it is important to be sure you are considering all options for your business.

Merchants accounts are accounts with a band or payment processing center that allow you to actually physically accept and draw money from the credit card for your businesses products or services. Many different platforms exist including physical locations, e-commerce and telephone processing. The beauty of excepting credit cards it will allow you to have customers from all the world opening many opportunities for you to grow your business.

There are two many types of merchant service accounts which are card present and card not present accounts. These basic types also have a variety of subgroups, which we will discuss in detail below.

A card present account is just that, the card is present at the time of swiping the card on the transaction. This is the type of transaction where the merchant is able to take the physical credit card from the client and swipe it through their magnetic card reader. These type of processing accounts are very low risk as the customer themselves is present when they make the purchase and are required to sign, which shows they made the purchase. This merchant account will also yield you the lowest fees and rates. Physical retail locations will want to consider this type of account, as it is most convenient for their customers and will cost them the least amount of money in the long run. It is also important for a retail location such as this consider a mail order credit card processing account as well.

When a vender has a portable credit card machine this is called a wireless merchant processing account. The vender will still swipe the customers card the same way but the actual credit card machine is portable and wireless allowing for portability and use of the machine in various locations. The fees with this type of account remain very low but the cost for equipment is higher for this type of unit. This would be a good option if you area business that needs to accept credit cards while you are in the field. This would include home repairs, craft or farmers market sellers or salespeople. This will greatly increase the number of sales you can receive from your business.

A store and forward account is the type of credit card processing account where the credit card information is stored but not processed into a handheld machine. Once the unit is hooked up to a phone line and Internet connection the unit will process all stored credit cards. Since the real time credit approval is not granted. This is an option that is ideal for business that are on the go and require credit card acceptance but have low ticket value and few credit card declines. It is very similar to a wireless account but more cost effective for the merchant.

There are a few smaller types of accounts designed for specialty businesses. The first is a grocery merchant service account, which is specifically designed for locations that sell perishable food and no gasoline. It does not have to be a large market but it does have to meet the guidelines. These types of accounts are generally considered very low risk and have very low fees. Lodging accounts are for those businesses that are within a hotel, motel or other unit where customers spend the night. The lodging accounts have much higher rates then most card present locations. This is due to the fact of various incidental charges that can be accumulated during a customers stay which may cause the card to be declined at the final point of sale. One final kind of specific card present account is the restaurant merchant account. This allows the restaurant to authorize the customer’s card and then go back and adjust for gratuity. These types of restaurant accounts can get a bit tricky to use and could end up costing the restaurant on high tip amounts. It is very important to consider all these options before signing up for a restaurant processing account.

We will now discuss card not present accounts. This is exactly as it sounds the physical card is not present to the vendor when they take the credit card information. This would the main type of account for all Internet based business, telephone sales and mail order business. It is impossible to guarantee the cardholder was present when the order was placed with the card. The only way you can prove that is with card present accounts as the customer has to swipe the card in the vendors process and can be asked fro identification if necessary. Card not present accounts are a much higher risk because of this and in turn will have much higher fees. When you are reviewing various credit card processing solutions you will have a different rate for card present versus card not present merchant accounts. This is even true if your company holds both types of accounts. It is important to take all these things into consideration when determining what would be the best option for your business.

An Internet account is a card not present account that is used by e-commerce businesses to process orders in real time over the Internet. This is all completed through an electronic gateway that will accept or decline the card in an instant. If the card is declined the customer can use a different card or their order will not be processed. These types of accounts are used when the Internet is the main store front for the business and most of their sales are conducted in this fashion. It is important to have a good payment-processing gateway when working online as it allows the totals from your websites shopping carts be processed right into the merchant account without any human interaction. This is convenient for customers to be able to make purchases on the spot without anyone helping them. Using this form of payment process gateway and processing account will allow the online website and business to accept payments 24 hours a day seven days a week anywhere around the world. Most Online merchant accounts will also allow the option for the merchant to key in the customer’s information for processing. Online transactions will have much higher fees then your card present account because of the various risks associated with card not present merchant accounts.

Mail order accounts are among the most popular types of card not present merchant accounts. How a mail order account works is the customer fills out all their credit card information on a card or order form that is then mailed to the customer for processing. The Merchant will typically will manually enter all the cards information and then process the card. Once the card has successfully be accepted the order will then be fulfilled. Mail order merchant accounts do receive the best rates of any card not present account, as they tend to have the lowest decline rates for this type of credit card processing account.

Another type of card not present merchant account is the touch tone telephone merchant account. This type of merchant account operates exactly as you would expect. The customer or merchant enters all their card information over a touch tone phone for processing. No credit card equipment is needed all card information is gathered from the phone and verbal prompt system and then processed. The system will automatically approve or decline the transaction. An authorization number will then be provided which should be marked down on a receipt for the customer. It is crucial you have an imprint machine for these types of transactions if possible. The rates on this type of merchant accounts are significantly higher because of both the risk as well as the fact that a third party touch tone system typically will be involved.

It is important to think about all these options for your business to decide which one will work best for you. Many merchants do need more then one type of merchant account one for their physical store location and another for their website e-commerce store. Take the time to imagine how you will be processing credit card transactions and consider if your business will require payments on the go, payments online or will customers be mailing in orders. You will also need to think about what your average transaction amount will be. This average transaction or ticket amount will determine some of your fees as well. It is important for you to have a good idea on where this transaction amount will fall.

One thing to keep in mind any business may have more then one type of merchant account. Stores may have your traditional swipe physical merchant account and they may also run an e-commerce store and have a webs based merchant account to take credit cards on their website. The largest difference among merchant accounts are the format in which they accept payments and the monthly fees and discount rates to use each of the different types of accounts. Your fees will also depend on the nature of the type of business you are conducting. The fees and discount rates are determined by business and the risk associated with taking a card in each environment.

It is important to take the time to really research all your options when it comes to the perfect merchant account solution for your business. If you take the time to review all the different areas it will make the decision much easier and allow your business to handle credit card processing to the bets of its ability. The businesses ability to process credit cards will dramatically affect how successful the business is. It is important to get the best possible merchant account to ensure the most success from your business venture.