Merchant Services: Understanding Your Options in Today’s Marketplace

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Author: Karen Zabel

Establishing a merchant account allows your business to accept credit cards, a move that can result in significant growth of your business, income, and customer base. In today’s rapidly evolving marketplace, having a merchant account is a near necessity if you want to remain competitive. To satisfy the ever-changing needs of a global society, merchant accounts are offered that are uniquely designed to satisfy the account processing needs of a wide variety of businesses.

When business owners think of a merchant account provider, typically the first notion that comes to mind is that of the traditional credit card transaction, performed on-site at the point of purchases, using a scanner or “swipe” machine to capture and transmit customer data to the card issuer. But in fact, while that may be the most immediately familiar of all merchant accounts, there are several types of accounts that you, as a business owner, can choose from.

The following guidelines will help you determine which type of account is right for you, as well as explaining some of the basic differences between your merchant account options.

Internet Merchant Accounts

These accounts are designed to meet the unique needs of businesses who sell goods or services over the internet. Internet processing involves using either a virtual terminal or weblink gateway that accepts and processes credit card information and helps businesses and merchant account providers ensure that credit card purchases are valid. A virtual terminal takes the place of a standard terminal typically used in brick-and-mortar establishments, and allows an online merchant to manually verify and process credit card transactions from any computer that is connected to the internet.

Virtual terminals are practical only for low-volume businesses that can devote the time required to manually review credit card information. A weblink gateway is an automated terminal that accepts credit card information entered online, and then verifies the transaction through a connection to the card issuer. Both the customer and the business owner are notified if the transaction has been approved or declined. The weblink gateway may also oversee automatic processing of credit card transactions each day, initiating the transfer of funds from the card issuers to the business account. Fess associated with internet accounts are frequently higher to offset a greater risk of credit card fraud that can occur with internet transactions.

Retail Merchant Accounts

These accounts are used by brick-and-mortar businesses, including stores, service providers, and restaurants. Unlike internet accounts which use a virtual terminal, retail merchant accounts use a physical machine to scan and process card information. The most common machine is the countertop unit with a slot for “swiping” the card to obtain information linked with the account. Businesses with higher volumes typically receive discounts on transaction fees, but may pay higher monthly fees to their merchant account provider. Because these transactions require “face-to-face” contact with the buyer, the risk of fraud is significantly lower with these accounts than with internet or phone orders, and enjoy a lower transaction fee as a result. These accounts also usually have the least restrictions.

MOTO (mail order and telephone) Merchant Accounts

As the name implies, these types of accounts are for businesses who take orders via mail-in order forms and telephone. These accounts are generally associated with higher transaction fees and lower monthly rates.

Wireless Merchant Accounts

This type of merchant account is the newest to emerge, and is rapidly growing as more and more businesses embrace cell phone applications that allow them to browse the web and initiate purchase transactions from any location. Wireless merchant accounts are ideal for salespeople and other professionals, including contractors, landscapers, consultants who travel to a client’s site for sales or to perform a service. Some providers of wireless merchant account services also offer a feature that allows you to store credit card information in locations when coverage is not ideal, and then process your transaction in areas with greater wireless coverage.

High-risk Merchant Accounts

These accounts are usually the best choice for businesses that offer goods or services which are at the greatest risk for fraud and chargebacks, including pharmacies, travel agencies, adult stores, and casinos.

Offshore Merchant Accounts

Because many standard credit card verification procedures, including address verification systems, used to deter fraud are limited to use in the United States, merchants and businesses that conduct business around the world may opt for an offshore merchant account. These accounts typically involve higher fees, but also offer an added measure of protection against fraud and misuse.

The merchant account provider business is constantly evolving, and new products are continually emerging to address changes in the global marketplace. By taking some time to determine the types of transactions you are most likely to encounter when running your business, you can ensure that the merchant accounts you establish will help you grow your business with ease and success.

Karen Zabel is a freelance writer who writes about businesses and merchant services.