businessman
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Before you even consider looking for a specific merchant service provider you need to profile your business. How do you want to accept credit card payments from your customers? Will it be in person, online, or perhaps out in the field?
Depending on how you envision your business to accept cards, it will fall in to one of the two most basic merchant account categories.
Card-Present Merchant Account – A card present merchant account is an account that is setup by the processing bank under the assumption that the customer and the credit card will be present when an authorization is obtained (when the card is charged).
Card Not-Present Merchant Account – A card not-present merchant account is an account that is setup by the processing bank under the assumption that the customer and the credit card will NOT be present when an authorization is obtained (when the card is charged).
The main category of account that best fits your business needs will dictate the base of fees that you can expect. Card not present merchant accounts carry more risk to acquiring banks, and therefore have higher rates and fees. Comparatively, card-present merchant accounts pose a lower risk and are afforded lower rates and fees.
Card-Present Sub-Categories
Retail – The most basic form of a card-present merchant account is a retail account. This is an account where some type of electronic terminal is used to obtain an electronic data capture (card swipe) in order to authorize a customer’s credit card. A retail merchant account will have the lowest rates, fees, and equipment costs of any merchant processing account.
Wireless – A wireless account will offer you the ability to swipe credit cards while on the go, and it will provide a real-time authorization (you’ll know if the card is good or bad seconds after swiping it). Wireless accounts typically carry the same rates and fees as a retail account, with the addition of a wireless transaction fee, and a monthly wireless access fee. Wireless credit card terminals are the most expensive type of credit card terminals. When purchasing a wireless credit card machine, purchase a terminal that is compatible with the most providers possible, like a Nurit 8000. You should pay between $700-$900 to buy this terminal - no more.
Store-and-Forward – Store-and-forward refers more to the equipment that is used to process cards than it does to the type of account. I recommend this method of processing for any new business that process most transactions while stationary (in a store), but may need to travel periodically. Store-and-forward functions by utilizing a credit card terminal that stores swiped credit card information that is taken in the field, and later sends the transaction information to the processor once a phone line or other method of electronic communication becomes available. Store-and-forward offers the same low rates as a retail account and the portability of a wireless account without the hefty wireless fees.
Card Not-Present Sub-Categories
Mail-Order/Telephone Order Merchant Account MO/TO – A MOTO account is the most basic form of card not-present merchant accounts. This account will have base rates and fees that are higher than those of card-present accounts, but not as high as other card not-present account types.
Touchtone Processing – Touchone merchant accounts utilize an automated phone service which the merchant calls using a touchtone phone in order to process transactions. Touchtone accounts have higher rates and fees, but require little up-front investment because there is no equipment that a merchant needs to purchase.
Internet Merchant Accounts – I think most of us here know what an Internet merchant account is. Internet merchant accounts usually carry the same rates and fees as a MOTO account, but have an additional monthly gateway fee, and sometimes an additional gateway transaction fee depending on the gateway that is used.
General Considerations
Keep clear of contracts – Merchant account contracts do not offer any benefits to you. They do not guarantee rates (regardless of what a salesperson may tell you), and they are only advantageous to the merchant service provider. Some of the processors mentioned above such as CardService International and NOVA have such contracts and cancellation fees. Do yourself a favor and steer clear.
Local Banks are often Anything but Local – Local banks often act as agents for larger third-party processors, aggregators, or independent sales organizations. Many business owners look to their local bank for merchant services because they feel like the are keeping their business in-house – this couldn’t be father from the truth. Not only will your account be hosted by the originating provider, but the rates and fees will be higher to account for your bank’s commission. Not all banks are resellers, but don’t give your bank any extra consideration just because they appear to be local.
Depending on how you envision your business to accept cards, it will fall in to one of the two most basic merchant account categories.
Card-Present Merchant Account – A card present merchant account is an account that is setup by the processing bank under the assumption that the customer and the credit card will be present when an authorization is obtained (when the card is charged).
Card Not-Present Merchant Account – A card not-present merchant account is an account that is setup by the processing bank under the assumption that the customer and the credit card will NOT be present when an authorization is obtained (when the card is charged).
The main category of account that best fits your business needs will dictate the base of fees that you can expect. Card not present merchant accounts carry more risk to acquiring banks, and therefore have higher rates and fees. Comparatively, card-present merchant accounts pose a lower risk and are afforded lower rates and fees.
Card-Present Sub-Categories
Retail – The most basic form of a card-present merchant account is a retail account. This is an account where some type of electronic terminal is used to obtain an electronic data capture (card swipe) in order to authorize a customer’s credit card. A retail merchant account will have the lowest rates, fees, and equipment costs of any merchant processing account.
Wireless – A wireless account will offer you the ability to swipe credit cards while on the go, and it will provide a real-time authorization (you’ll know if the card is good or bad seconds after swiping it). Wireless accounts typically carry the same rates and fees as a retail account, with the addition of a wireless transaction fee, and a monthly wireless access fee. Wireless credit card terminals are the most expensive type of credit card terminals. When purchasing a wireless credit card machine, purchase a terminal that is compatible with the most providers possible, like a Nurit 8000. You should pay between $700-$900 to buy this terminal - no more.
Store-and-Forward – Store-and-forward refers more to the equipment that is used to process cards than it does to the type of account. I recommend this method of processing for any new business that process most transactions while stationary (in a store), but may need to travel periodically. Store-and-forward functions by utilizing a credit card terminal that stores swiped credit card information that is taken in the field, and later sends the transaction information to the processor once a phone line or other method of electronic communication becomes available. Store-and-forward offers the same low rates as a retail account and the portability of a wireless account without the hefty wireless fees.
Card Not-Present Sub-Categories
Mail-Order/Telephone Order Merchant Account MO/TO – A MOTO account is the most basic form of card not-present merchant accounts. This account will have base rates and fees that are higher than those of card-present accounts, but not as high as other card not-present account types.
Touchtone Processing – Touchone merchant accounts utilize an automated phone service which the merchant calls using a touchtone phone in order to process transactions. Touchtone accounts have higher rates and fees, but require little up-front investment because there is no equipment that a merchant needs to purchase.
Internet Merchant Accounts – I think most of us here know what an Internet merchant account is. Internet merchant accounts usually carry the same rates and fees as a MOTO account, but have an additional monthly gateway fee, and sometimes an additional gateway transaction fee depending on the gateway that is used.
General Considerations
Keep clear of contracts – Merchant account contracts do not offer any benefits to you. They do not guarantee rates (regardless of what a salesperson may tell you), and they are only advantageous to the merchant service provider. Some of the processors mentioned above such as CardService International and NOVA have such contracts and cancellation fees. Do yourself a favor and steer clear.
Local Banks are often Anything but Local – Local banks often act as agents for larger third-party processors, aggregators, or independent sales organizations. Many business owners look to their local bank for merchant services because they feel like the are keeping their business in-house – this couldn’t be father from the truth. Not only will your account be hosted by the originating provider, but the rates and fees will be higher to account for your bank’s commission. Not all banks are resellers, but don’t give your bank any extra consideration just because they appear to be local.