What is a Merchant Account and How Can One Benefit your Business?

If you want your business to succeed, you need to accept credit cards. About 75 percent of all families carry a credit card and expect to be able to present it when they pay for goods and services. If you are not accepting credit cards, you should consider shutting your doors now. On the other hand, if you do accept credit cards, you need to open a merchant account – to protect you and your customers.

Here are some statistics that reveal how essential credit cards are to American spending habits:

* · Almost three out of four families use a credit card. More than 50 percent have at least two.
* · In the United States, most people have an average of four credit cards.
* · Credit card purchases represent a huge amount of people's spending. In fact, in 2009, the median household income was $43,200 and the credit card balance was almost 5 percent of the annual income.



If you are going to cash in on this huge segment of the population, you should do it in a way that benefits you and your customers. You owe it to yourself to have access to the same conveniences enjoyed by your competition. A good merchant account offers you the software, hardware and support you need in order to accept credit card payments for your products or services in a timely and safe fashion.

For the uninitiated, here's how a merchant account works:

* · You, the merchant, agree to accept a credit card payment for your goods or services. In order to keep your business competitive and your customers safe, you open a merchant account to handle your credit card transactions.
* · The merchant account you open has a relationship with a bank or institution that agrees to pay you for each valid credit card transaction. In return, it is the bank or the institution's responsibility to collect the money from your customer. You have been paid. It's on the merchant account to collect.
* · Major credit card companies, like VISA, MasterCard and American Express, work with merchant accounts to collect their money from the bank or other institution. Credit cards companies are willing to assume the debt because they know they will get their money from the bank. They do not have to deal with each business to pay them.
Here's what you need to do on your end of the merchant account:
* · When you make a sale, you swipe the customer's credit card through your credit card terminal, or you run the credit card number through your hardware.
* · After going through a number of steps, your customer's money is transferred through your merchant account and deposited into your business checking account. In other words, you get paid.
* · With most merchant accounts, the merchant has the choice of accepting credit cards in real-time or utilizing deferred processing. Most retailers want to process the transaction in real time. On the other hand, deferred processing lets you process the order later, which can be helpful if you need time to check on the product's availability.
Credit cards are not the only payment system a merchant account can process. Two others to consider are debit (or ATM) cards and e-checks.
* Debit Cards
* From the merchant's point of view, a debit card is processed just as you would process a credit card. The only difference is that the funds come directly from the customer's checking account and will not appear on a credit card bill.
* E-checks
* These are standard paper checks, but they are processed online and do not require the customer's signature. But you, the merchant, need to ensure you have the name of the bank that issued the check, the routing number and the checking account number. The same hardware and software used to process debit cards will process e-checks. But in order to accept and process an e-check, you need the software that will allow you to print online checks. Once that step is cleared, you deposit the printed e-check into your bank and wait a couple days for it to clear.
* So how do you know which merchant account is right for your business?
* · First, review the fee you will pay for each credit card transaction, but do not simply choose the lowest rate. Check out the services you are receiving and compare the different merchant account services.
* · Review the equipment you will receive. Is it PCI compliant? Does it meet industry standards? Can it be quickly replaced if it goes down?
* · How good is the customer service provided? Is it 24/7?
* · Which credit cards will you be able to process? If the list is limited, your customers will also be limited as to how they can spend their money.
* · How long will you have to wait to access your funds? Seek a service that holds onto your money for the fewest days possible.

Take this important tips into consideration as you search for the merchant services account that's right for your burgeoning business.

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