Your Guide to Basic Merchant Account Knowledge


eCommerce is growing year over year, with consumers spending hundreds of billions. A report from the US Commerce Department showed a solid 16% growth in consumer spending, driving more and more businesses to grow and maintain the eCommerce arm of their business. Whether you’re just developing your website, or you have a substantial online presence, it’s becoming crucial to connect with customers online.

In addition to a website, and a cohesive branding and marketing strategy, you will need a merchant account to accept global online payments. You’ll learn what these accounts do, and how to get the best possible deal for your business.

What a Merchant Account Does

You Ultimate Guide to Merchant Account Knowledge

In the simplest of terms, a merchant account is nothing more than a way for you to accept payment online. At the fundamental level, a merchant account is actually an agreement among many companies to pass payment information along to different accounts. Utilizing a payment gateway, a merchant account allows customers to pay for an item in an anonymous funnel that moves money across accounts with a transaction ID.

Without a merchant account, you would need to rely on a third party like PayPal. Such options exist, but don’t tend to scale well with growing businesses. If you’re an independent, and you handle only a few transactions each year, PayPal is a viable solution with low costs. Retailers who handle tens or hundreds of thousands in business each year need an option that offers a better rate.

It’s very important to shop around and find the right account for your business.

Shopping for Your First Merchant Account

First, you need to think about the credit risk your business presents to a merchant provider. High-risk accounts pay more in fees and interest rates. If your business doesn’t have a long history, sells items not common in the marketplace, or if the business is offshore, it can present a higher cost for basic services.

You should also look for services that have the fewest fees. Application, setup, and monthly fees are commonly waived, so as you’re making a list of viable candidates be sure to give priority to those that cut these introductory fees.

How to Find the Best Rates?

Paying to use a credit card machine is unavoidable, but there are some steps you can take to reduce the costs of doing so. For one, purchasing your own terminal and backend for a website will help a great deal. You will pay upfront, and possibly in development or integration for a website, but you don’t pay monthly for usage.

In the store, try and avoid manual transactions. This is one reason why it’s important to have a good support system, and backups. If something goes down, and employees are keying transactions in by hand, you’re paying more money for each swipe. Get on the phone with support and get your equipment replaced.

You can also impose a minimum amount for credit card transactions. You might lose some customers who can’t meet that amount, but it will help ensure every transaction is profitable.

Final Thoughts

A merchant account is crucial to the operation of a retail or online business, and with eCommerce growing it’s an important part of doing business in the future. Make sure you do some comparison shopping so there are no surprises, and avoid signing any contract you haven’t read. Remember, you can change providers over time. Take this time to learn the ropes, and try your best to make a good first decision.