Congratulations! You’ve decided that opening a merchant account might be a good move for your business †and you’re right. Opening a merchant account is the initial step that will allow your business to accept credit cards †and even debit cards and gift cards, if you like †to pay for your company’s products. And that means it’s also the initial step toward allowing your company to become more profitable and more competitive than ever before. Establishing an account with one of the many merchant account providers vying for your business is a relatively simple process that can usually be completed online in just a few moments’ time. But before you submit your application to the company you select, it’s a good idea to take some time to develop an understanding of the advantages and benefits offered by today’s merchant account providers. Just what is a merchant account? Essentially, a merchant account makes it possible to accept and process credit card information at your place of business, whether that means a traditional storefront location, an online web store, or another locale. The account offers services that gather the credit card information and transmit it to the card issuer for validation, as well as systems for transferring the funds from credit card purchases directly into your business bank account. What information do I need to supply with my application? In most cases, you will need to supply your company name and address, as well as your own name and address, and business financial information. If your business is brand new with no financial history, the account provider will likely request your tax returns and other personal financial information. In addition, the account provider will pull your credit report, and/or the credit history associated with your business. You’ll also need to have a business bank account capable of accepting the proceeds from your credit card transactions. What are the fees associated with merchant accounts? The types and amounts of the fees and costs you’ll encounter depend on the type of account you need, whether or into your business is considered high-risk, the amount of sales your business completes in a month, and the account provider you select. The type of account you choose will, in turn, depend upon the way in which you want to do business: through a retail establishment, on the web, by phone or mail, or on the road using a mobile device. Each different type of account has different fees associated with it. If your business needs more than one type of account, ask your merchant account provider if they offer discounted packages combining two or more account types. During the last few years, many account providers have reduced or even eliminated fees once charged as competition among account providers has increased. Here are a few of the fees you can expect to encounter: â€Application fee, and/or setup fee: The application fee is charged to cover any costs associated with processing your initial application for approval, and may or may not include additional costs for setting up your account, once approved. These fees may be waived by many merchant account providers today. â€Programming fee: In some cases, these costs may be included in a setup fee, and include any costs or fees associated with setting up the software used to manage the account. As with the application fee, some merchant account providers have eliminated the programming fee, or rolled it into other fees. â€Discount rate: This is a percentage rate that is charged on each transaction, and varies based on the type of account you have. The discount rate usually ranges from 2% to 4%. â€Transaction fee: Like the discount rate, this fee is charged on each transaction, but unlike the discount rate, the same fee applies to each transaction, regardless of the amount of the transaction. Transaction and discount costs are usually debited at the end of each business day, before funds are transferred to your business account. â€Monthly fee: Sometimes called a maintenance fee, this fee is assessed to cover the costs of managing your account and keeping it running smoothly. The monthly fee can vary, based on your provider, the type of business you operate, and the monthly sales volume. Understanding a few merchant account basics can help ensure you select the best account for your company. Take the time you need to be a smart merchant account consumer, and to make the most from your hard-earned dollar.
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