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Accept Credit Card Merchant - How to Accept Credit Cards with or without a Merchant Account

1. merchant account

Anyone planning to sell a product or service online will need to accept credit cards because it is still the most prevalent means of transferring money online. At one time, it was impossible for a business entity to accept a credit card without a merchant account, but more recently, other avenues have opened.

Methods for Accepting Credit Cards

1. Merchant Account

A merchant account is a form of bank account that accepts direct payment via debit or credit cards. However, a merchant account is also an agreement between the owner of the account, often a retailer, and a merchant bank and a payment processor. In many cases, the merchant bank and payment processor is one in the same.

2. Third-Party Merchant Account

A third-party merchant account, also called a payment gateway, is an account used by a business to accept credit card payments on behalf of another business. Generally, the owner of the account charges the user a flat fee or they rake a percentage of each payment that they process. This is in addition to the primary processing fees.

Which method is right for my business?

New merchant accounts incur setup fees from the bank and processor that are relatively high from the perspective of many new small businesses. Using a third-party merchant account allows that small business to avoid the setup fees. However, due to greater fees on a per purchase basis, the cost of using a third-party account can be greater over time.

The way to determine which is more cost-effective is to estimate the number and amount of purchases. Generally, third-party merchant accounts make sense for the business that accepts payment infrequently. Even if you are accepting only several payments per week, the merchant account is likely to have paid for itself within 3-5 years.

The Hidden Costs of “Free” Merchant Accounts

Some companies offer “free” merchant accounts. However, it is important to recognize that free merchant accounts are not viable business entities. In other words, it is too good to be true, and generally, these are dressed-up third-party merchant accounts. Often, the business will discover that the cost is higher in the end than even a traditional third-party account service.

Not All Third-Party Merchant Accounts are Created Equal

In the section about choosing one method or another, we painted a somewhat grim picture of third-party merchant accounts. However, this isn’t always the case. Some companies allow you to accept credit cards through their merchant account as part of a greater package of services. A great example of this is PayPal, which is the most widely used provider of account services online.

In this business model, they charge you a fee for every transaction you make just as a simple third-party merchant account does. However, the difference is that they also provide you with a large range of services such as an online business bank account, fraud protection, and recurring billing, just to name a few. Potential clients should note that it is possible to set up a full-fledged merchant account with PayPal as well, thus saving money in the end.

How do I add payment processing to my website?

Some merchant accounts provide the code that you can customize and then add directly to your website. Third-party merchant account providers like PayPal provide you with a sophisticated suite of customizable tools. In some cases, you will be accepting payment from various sources. You have two options here. You can either have two or more separate payment webpages, one for each. Alternatively, you can combine them into a single page. However, you will likely need a professional web designer if you lack the skills yourself or on your staff.

Before making a decision, consider each service in light of the following bullet points:

• Note the transfer period as this varies considerably. Companies offering the most aggressive deals generally have slow processing in order to recoup your savings via interest. Note the difference between retail and MOTO transactions since MOTO transaction take considerably longer to clear.

• You can negotiate with these companies. Credit card processing is big business. If you find a service that is almost perfect, negotiate the aspect that is keeping it from being perfect. It often helps to have an example of a competitor offering that aspect at a better rate.

• Read the contract, and if you can afford it, have a lawyer read the contract. Do this before signing it. This is crucial, and we cannot stress enough how often these companies slip lucrative gotchas into their contracts.

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