What You Need To Know About Credit Card Processing / Merchant Accounts
Merchant Processing 101
"The book that the banks and credit card processors don't want you, the merchant, to read !!"
- Are you a business owner?
- Do you accept credit cards for payment?
- Do you understand all of your monthly fees?
Stop your credit card provider from taking advantage of you !
Find out how: Order Merchant Processing 101 !
There is quite a bit of confusion in the credit card processing / merchant account industry regarding the terminology used to describe the companies involved. Sometimes this confusion is caused purposely, perhaps to mislead prospective customers, and lure them into becoming customers.
This article will attempt to clarify all this by clearly defining the terms being used. So please read the first few paragraphs slowly - don't just skim over them. It's not easy to understand, and requires careful consideration.
What is a merchant account?
A merchant account is simply a business bank account that allows your business ( ie - the merchant ) to accept credit cards. You can ask any bank for a merchant account, but such an account may not be easy to get. Once your account has been approved and is open, the bank will then accept payments ( ie - deposits ) forwarded to your account.
Sometimes it can be confusing as to what kind of institution can give you a merchant account. Only a bank can do this. However, the bank may allow an agent to sign up merchants for them ( acting like an affiliate for the bank ). Frequently this agent is a credit card processing service ( sometimes called a gateway ). The agent may not say so explicitly, but when he offers you a merchant account, he is really only representing the bank.
If you are not able to obtain a merchant account with a bank, other options are available which can allow you to accept credit cards - so-called third party credit card processors, which are discussed on another page of this website. These companies may be your only solution, or may simply be a short-term solution for accepting cards while you are waiting for approval by a bank.
Why should I have a merchant account?
Getting a merchant account is definitely the way to go if you can get one, since it's the least expensive way to take in the payments from your credit card transactions. If you have a good relationship with you present bank, that's the best place to try to get such an account. But since banks are essentially very conservative, they may not choose to accept the risks of providing you with this type of business account, particularly if you are seeking a card not present account ( used when the merchant obtains the credit card information by phone, or over the internet ).
What do I need to show the bank when I apply for a merchant account?
- Business License - This is required in order to open any kind of business bank account, even if your business is entirely online.
- Proof of Existence - You must prove to the bank that you have either a physical business, a mail order / telephone order business, or an ecommerce business.
- Customer Services - The bank will want to know what you are selling, included prices, and what your policies are regarding refunds and customer service.
- Chargeback Prevention - What is your business doing to mimimize customers changing their mind about purchases? The usual percentage of chargebacks allowed is 1% of total sales. If you have been using another service to accept credit cards, you will need to provide the bank with your chargeback history.
Now that you have a basic understanding of the credit card processing / merchant account industry, you still need to look at the details that were not covered thoroughly in this article. Just click on any link, either in the menu at the bottom of this page, or in the article body above.
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