Simple Ways Merchant Services can Keep Business Booming

The internet has changed the way Americans shop. Even in the wake of the economic recession, online sales have increased for thirteen consecutive months in the United States. At the current pace, online sales are on track to surpass retail purchases within five years. What does this mean for businesses in the U.S.?To begin with, it means that they must establish an online presence. No, they need not become an e-business overnight or cut out the physical storefront, but they should begin selling online to attract younger shoppers.

As the numbers clearly illustrate, the consumer of the future is far more likely to shop online than he is to stop at the mall.Unfortunately, selling goods or services on the internet is a bit more complicated than simply setting up a website. A business owner must also apply for and obtain a merchant service account. Because the primary payment options for online sellers is and always will be electronic payments, a business must be able to process credit and debit card transactions.

What are the advantages?

Over ninety percent of online payments are made using a credit or debit card. The rest are completed with payment services like PayPal or with personal checks or money orders. Because they are slower and less reliable then instant electronic payments, checks and money orders are rarely accepted by online businesses. Payment services are just as fast as credit/debit card, but both the buyer and the seller typically have to be members and the rates are quite a bit higher.Credit/debit card are clearly the most popular, reliable, and affordable option for companies that want to sell on the internet. But again, a business must first apply for a merchant service account, and there is no guarantee that they will get one.

What do they do?

As you may have guessed by the title, the provider offers the merchant a crucial service. It is their job to examine every single debit/credit card transaction to ensure that the customer can actually pay. If the charge is approved, the provider will send the customer’s debit/credit card company a bill and await payment. When the payment is received, they will send the merchant the balance minuses a small, but variable fee.

Basic Fees

As you may know, banks and financial institutions are obsessed with risk. Every loan they issue or relationship they have takes risk into account. They are particularly fastidious when it comes to merchant service contracts. Depending on the type of account, accepting credit or debit card payments can be risky. As a general rule, the more contact a seller has with his buyer, the less risk. If, for example, a business accepts credit/debit card payments in person, they are often considered low risk. There are two simple reasons for this.

The first is that they will have a signed and dated sales receipt on file. And the second is that they are able to compare the signature on the back of the card with the signature on the receipt and thusly prevent fraud.Why is this important? The single most expensive charge for merchant service providers is called a chargeback. A chargeback occurs when a customer decides he wants a refund. His credit or debit card company is then obligated to request restitution from the provider.

At this point, the provider is forced to investigate the claim to determine its validity. This takes time and money.If the provider chooses to issue a refund, the merchant will be hit will all the related fees and may also be fined. In extreme cases with particularly risky merchants, the account may be terminated. We mention these charges because they are the single most important factor in determining the basic fees.

Which Account to Choose?

Every company that accepts credit/debit cards will be charged a transaction fee. This fee is typically a small fixed number for each sale. For example, a merchant will be assessed a thirty cent fee every time a customer swipes a credit or debit card. That is why most high volume businesses that sell low price items, like convenience stores, post a sign with a minimum sales price of at least ten dollars. After all, if a customer went to purchase a pack of gum for 25 cents, the merchant would actually lose 5 cents because of the 30-cent transaction fee.

Therefore, a merchant should always look for an account that suits his business inventory and sales volume. For example, the owner of an electronics store would probably save money with an account that charged slightly higher transaction fees and lower monthly fees because he is selling more expensive items and his monthly sales volume is not that high.On the other hand, when we consider our convenience store, the owner relies on high volume sales and slim margins to turn a profit. As a result, he should look for a service account that offers the lowest possible transaction fees, even if that means paying a slightly higher monthly fee.

Alvin Jelks is a freelance writer who writes about a range of topics including merchant services.

Article Source: http://www.marketingarticlelibrary.com

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