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Learn These Important Comparisons About Merchant Accounts To Improve Business Cash Flow

Dec 21, 2009 Sales

Merchant accounts are contracts between an acquiring bank that extends lines of credit to a merchant, and that allow businesses to accept payment for goods or services via 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.

Regardless of the type of business, the availability of merchant accounts will definitely improve your cash flow in several ways. Below are some 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.

- Issues about debt collection will become the bank’s problem, not yours.

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 have to institute measures to protect your business from credit card fraud.

- You may need to revise your policies and procedures surrounding charge-backs and refunds to minimize damages.

- If your business accepts credit cards on your website, be sure to use fraud protection measures to lower the risk of fraud, theft and scams.

Implementing Merchant Accounts

Setting up a merchant account is a relatively simple process. You will need a company bank account for any credit card purchases to be deposited into. You’ll also need to lease processing equipment and/or software 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.

Importance Of Comparing Merchant Accounts

Before you call your bank to get a merchant account, take the time to compare the options and offerings of several different banking institutions, in addition to merchant account providers. Fees and charges often vary greatly, so its very important to check what you’ll be charged and what fees are likely for each transaction.

For example, fees could include initial start-up costs, monthly lease fees for equipment, transaction fees…even sales volume costs and processing fees. Ask any potential provider for a written list of all the fees you’ll be charged so you can compare them accurately with other vendors.

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.

On top of these, you will incur transaction fees that range between $0.20-$0.50 per transaction. While these don’t sound high, if you process a lot of transactions they can really add up.

Other fees to ask about with any potential merchant account provider are charge back fees, minimum usage fees, statement fees, annual fees, close-out fees and account keeping fees.

David P. Montana has been a renowned industry expert, business consultant and writer in commercial collection agencies and other business services for thirty years. Read more helpful tools and information, including negotiating tactics, and important red flags and pitfalls to avoid when considering merchant accounts.

Tags: Business, business services, credit card processing, credit cards, finance, Merchant Accounts, Sales