What Every Business Owner Should Know about Merchant Account

So you’ve decided the time is right to begin offering your customers the option of using credit cards to pay for your business’ goods or services. Given the results of recent studies, you’re making a wise move. Research indicates businesses that begin to accept credit cards as a payment option see their profits increase dramatically, sometimes threefold, and in a very short period of time.
Opening a merchant account is a straightforward process. But before you fill out an application, take some time to learn about the merchant account and the benefits and options it can offer your business, so that when you search for a merchant account provider, you can make an informed and educated decision that will result in the greatest returns.
What Is a Merchant Account?
A merchant account simply aids in processing credit card transactions, and facilitates the transfer of funds from the credit card account to your business bank account.
What Fees Can I Expect?
Your fees will vary, based on the provider you choose, the type of business you operate, and whether you operate online, by mail or phone, or in a retail location. As more and more companies have entered the field of merchant account services, competition for customers has heated up, resulting in lower fees. Many providers have eliminated fees, such as application fees, annual fees, and setup fees. The following list is a sample of the fees you might encounter:
• Application fee. Many merchant account providers do not charge fees, or refund your fee if you are approved and open an account. These fees are charged to cover the administrative costs of reviewing your application and gathering business and credit data.
• Setup fee. These fees are also often waived, or just not charged, by a large number of merchant account providers today. These fees are charged to cover the costs of establishing the account itself, once you are approved.
• Software installation or programming fee. Often rolled into the setup fee, the software installation fee is just what it implies – the cost of having someone install the software necessary to manage your account. Many account providers do not charge for this service.
• Monthly fee, or maintenance fee. Nearly every merchant account provider charges a monthly fee to cover the costs of managing and maintaining your account. The amount of the fee will vary by provider, by the type of business you own, and by the average amount of business you conduct each month.
• Annual fee. Once an industry standard, many merchant account providers have eliminated this fee as competition has increased among providers.
• Discount rate, sometimes called the transaction fee. This fee is based on the amount of each transaction, and ranges based on the perceived risk level of the business. Online businesses, as well as those dealing in travel, gambling, tobacco, alcohol, medicines, adult services, and some other goods and services may be considered high-risk and are charged higher discount rates. Most discount rates range from 2 percent to 4 percent.
• Fixed transaction fee. This fee is the same for any transaction, regardless of the amount, and usually ranges from 20 cents to 30 cents per transaction.
• Chargeback fee. If a customer disputes a charge, you will be charged a chargeback fee. This fee varies based on the type of business you operate, and by provider.
• Compliance fees. These fees cover the costs assessed by the payment Card Industry, and are sometimes noted as “PCI” fees.
• Termination fee. This fee is charged by some merchant account providers if you cancel your account before the end of the contract period. Although merchant account providers used to regularly demand customers agree to a specified term during which their account had to remain open, many account providers are moving away from this practice. When a termination fee is specified, it can range from one to three years.
• Miscellaneous fees. Your contract will specify all of the fees included in your account, so be sure to read it carefully, taking note of all fees and comparing them as you search for the provider that’s best for your business. Some fees that may be charged include an over-utilization fee, which occurs when your monthly sales exceed your average; an underutilization fee, which is assessed if your sales are significantly under your monthly average; and an inactivity fee if your account remains unused for a given period of time.
Your merchant account can help your business increase its customer base and its profits. But unless you are aware of the fees that most accounts charge, you can easily end up paying too much for your account. Shop around, compare fees, and choose the one that offers the best service at the lowest cost, without sacrificing quality.

Karen Zabel is a freelance writer who writes about North American Bancard.

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

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