Important Merchant Account Comparisons And How They Affect Business Cash Flow

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

It should be known that customers are much more likely to buy from businesses that accept credit cards. Statistics show that businesses with merchant accounts will see sales numbers increase immediately. According to statistics the average cash sale is $9 while the average credit card sale is approximately $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:

Offering the option to pay with credit cards gives customers the chance to purchase on the spot.

Processing fees for merchant accounts can be lower than check transaction fees.

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

There are obvious & clear benefits to having merchant account facilities in your business. There are also drawbacks that should be examined as well.

You will need to protect your business against instances of credit card fraud.

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

If you accept credit cards on your website make sure you’re using fraud protection measures to minimize fraud theft & scams.

Instituting Merchant Accounts

Setting up a merchant account can be relatively simple. You will need to set up a bank account for your company for the proceeds of any credit card purchases to be credited to. You will also need to lease processing equipment & software that will facilitate 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 & offerings of several different banking institutions in addition to merchant account providers. Fees & charges often vary greatly so its very important to check what you’ll be charged & what fees are likely for each transaction.

For instance fees might include initial start-up costs equipment monthly lease fees sales volume costs transaction & processing fees. When looking at potential merchant account providers be sure to ask for a written list of all the fees you’re likely to incur so that you can accurately compare them with other vendors.

Merchant Account Charges & Fees

Different providers may charge some type of application fee. This can range from $0 up to $100 sometimes more depending on your lender.

You will also need to pay for your software which will have an initial cost of around $80-$100. Once the software is installed you’ll then have to pay the licensing lease on the software which could be anywhere between $20-$50 per month. Once again it depends on your lender.

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 you want to make sure you ask any potential merchant account vendor include charge back fees statement fees minimum usage fees annual fees account keeping fees & close out fees.

David P. Montana has been a renowned industry expert business consultant & author in commercial collection agencies & other business services for three decades. Read additional helpful tools & information including negotiating tactics & important red flags & pitfalls to avoid when considering merchant accounts.