Best Merchant Account Provider
Types of Processing
Credit cards allow funds to be
transferred to
your bank account in less than a week. This can be a welcome relief for
businesses that experience a tight cash flow. In addition, many
types of businesses just wouldn't work with an invoice payment system.
With a credit card processing system in place, you can catch
impulse buys and have a professional looking website that online
shoppers are familiar with. There is much to be said about developing a
system and letting an outsourced company do much of the work of credit
card processing for you, so you can deal with more important business
issues such as product development and customer satisfaction.
Qualifying for an account
Before
giving you an account, a services provider will want
to make sure that you are a legitimate business that will not leave
them liable for fraudulent charges. They will start with a basic
background check. This includes a thorough credit history review of the
owners or officers listed on the application, in addition to credit
references from two to three suppliers.
The most important
question that providers want answered is whether your business is
likely to have a high incidence of chargebacks. A chargeback is a
reversal of a sale that was credited to your account, usually because
of an error made by the card holder's bank, a misunderstanding by the
customer, or fraud.
Providers will also consider the type of credit card
transactions that your company performs. Swiping customers' cards in
person allows for much less risk of credit card fraud or
misunderstanding regarding what the customer is purchasing. Being
a higher-risk internet merchant does not necessarily prevent you
from getting an account - but it will drive up your costs.
Recurring costs
The primary fee on a credit card processor
account is the discount rate, a small percentage the provider charges
on each transaction. Banks and larger providers will base this fee on
criteria including: your company's evaluated risk, average sales
ticket, transaction type, and total charge volume.
Because of
the difference in risk, most providers have two different rates, one
for card-present transactions and one for MOTO (mail order/telephone
order, also includes Internet transactions) or card-absent
transactions.
Another processing fee charged by
the bank is the per transaction fee. There is also a fee
to cover the cost of issuing monthly credit card transaction summaries
or statements. In
addition to these basic fees, there are other fees
that service providers can charge: annual fees, programming
fees, internet processing fees, shipping and handling, American Express
setup fee, customer support fees, etc. Make
sure you have a complete understanding of all the charges you will
incur before making your decision of which one to
use.
Choosing a solution provider
Obviously price is an important factor in choosing a provider - but it should not be the only factor.
Customer
support can be essential - problems in credit card processing can
quickly impact your bottom line. The best way to learn about a
provider's level of customer service is to obtain customer referrals
from current clients.
If you are not using a bank or
financial company you recognize, make sure you verify that the company
you are investigating is legitimate. Contact the Better Business Bureau to check the
company's status if you are unsure, and if you find a provider on the
Web, make sure you get a physical address and phone number.
Internet
are used for businesses online. The website is the basis of the
business and all transactions are handled therein. These
accounts usually have a significant amount of support and security
because they are the means for the entirety of the business. Most
businesses that have a website can open an internet processor,
but it is especially helpful for those lacking a physical presence.
This type can be opened using a form online from the
bank.
Online are simply accounts that are opened online. These can be
opened by most businesses. Merchants that have land based stores and
also have online catalogues, benefit from these types of online
providers because they enable the stores to receive orders
online in addition to the land based activities. This helps internet companies
target a broader audience while retaining their regular business status.
High-risk
are used for businesses that have a high rate of chargebacks and risk
associated with them because they may conduct controversial business
activities such as dealing in adult entertainment or internet gambling
sites. Other high-risk companies include travel companies,
collectibles companies, pharmacies, and paycheck cashing. These
companies may be required to pay higher fees to account for the high
incidence of disputed charges. See our article on high risk
credit card processing services.
Offshore/Overseas
are an alternative solution for high-risk companies.
Offshore institutions are sometimes more likely to offer
competitive rates because they do not need to conform to the
requirements of U.S. Visa/Mastercard regulations. In addition
they afford a business a higher level of privacy from public scrutiny
and some tax advantages. They are also attractive to businesses
who do a high volume of business because there are no thresholds they
have to stay within. See our article on offshore merchant
accounts for more info.
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