A merchant account is simply a
relationship between a retailer and a merchant bank that enables retailers
to accept web-based credit card payments from their customers. This is
the account into which a Merchant Account Provider deposits payments into
your business checking account from the transactions made online. To qualify
for a merchant account, retailers must meet the bank's requirements.
Do I qualify for a merchant account?
Merchant account providers require merchants to meet certain requirements
for opening an account, requirements that often are particularly strict
for e-commerce businesses. In general, the riskier the provider deems
your business, the more difficult it will be to open an account and set
up your web site for e-commerce.
What basic requirements will you have to meet?
To process credit cards online, you need an Internet merchant account.
This is the account into which a merchant account provider deposits payments
made through your web site. All business owners who plan to process credit
cards must have a merchant account.
Requirements for obtaining a Merchant Account:
Almost every merchant account provider maintains the following basic requirements
for opening a merchant account:
The MATCH file is analogous to a credit-reporting agency. It is a file
maintained by the credit card associations and contains information about
businesses that have failed to handle their merchant processing responsibilities.
You must work with the company that originally placed you on MATCH to
get your named removed. You cannot get approved for a merchant account
if your name is on the MATCH list.
These are the minimum requirements. Merchant Account Providers often
ask for more extensive information and documentation in addition to that
listed above especially for merchants expecting more than $5,000 per month
sales volume. They may require you to:
Why is it so difficult for e-commerce businesses to get a merchant
account in comparison with a brick-and-mortar business?
In one word: risk. Transactions conducted via the internet are considered
by merchant account providers to be by their very nature riskier than
'normal' transactions:
What are the common fees and costs from any merchant account provider:
Internet discount rate.
An Internet discount rate is a fixed percentage taken from every online
transaction, usually two to three percent. The internet rate will generally
be higher than card-swipe rates, the rate charged when the merchant can
swipe the customer's card through a traditional point-of-sale (POS) terminal.
The internet discount rate runs at a higher rate because it's not face-to-face and is a riskier
proposition for the bank who provides the merchant account.
Transaction fee.
Merchant Account Providers typically have fixed charges and It works like
this. On a $100 sale, if the discount rate was 2.39%, $2.39 would be deducted
from a $100 sale. There is a transaction fee charged to each order and
we'll use 30 cents is this example. Therefore, on the $100 sale, the processor
would keep $2.69 , giving you, the merchant a net of $97.31. Note, some
banks deduct this fee at time of sale, while most deduct it as a total
of charges at the end of each month. Visa & MasterCard and the processor
take a fee for every transaction.
Monthly fees and minimums.
There is a variety of charges levied on a monthly basis by the bank, including
a monthly statement fee and/or a monthly minimum, excess usage fees, and
others.
Chargebacks.
Your merchant account provider may holdback, or reserve, a percentage
of your transaction receipts to cover any contested charges. A chargeback
is charged to a merchant when a consumer claims their card has been charged
and the merchant has not delivered the product or performed the service.
A chargeback fee is NOT charged when a merchant processes a return of
a charge to a consumer.
Reserve.
If your business is considered high-risk, you may have to pay what's called
a reserve. The reserve is usually calculated as a percentage of the monthly
credit card volume. It is built up over time and held by the bank in escrow
to offset unexpected chargebacks.
The application process may seem daunting, but keep
in mind, the better the merchant account provider understands your business,
the better the relationship is likely to be.
Where to apply for a Merchant Account:
The following are payment gateways that you can use to process your payments. We are not responsible for the services they offer. The values of rates and fees may differ.
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