Now You Can Establish an Internet Merchant Account for Your Online Business
Your online business deserves every
advantage you can give it to grow and thrive against competitors, both
on the web and off. One of the simplest, most economical ways to achieve
your goals is through establishing an Internet merchant account that will allow your business to accept credit cards.
Perhaps more than
any other type of business, it is critical for online businesses to
accept credit cards as a valid for of payment. Since more than 90
percent of online shoppers use credit cards to make their purchases, by
not accepting these ubiquitous cards, you run the risk of limiting your
customer base and even driving yourself out of business.
While opening a
merchant account is an obvious step for many online retailers, other
businesses on the web are hesitant to establish accounts. The following
guidelines will help dispel some of the myths surrounding Internet
merchant accounts, and can help you decide if opening an account is the
right step to take for your online business.
What is an Internet merchant account?
Like other types
of merchant accounts, an Internet business account allows your online
business to accept credit cards, debit cards, and ATM cards as forms of
payment. Internet merchant accounts employ special features to help
limit the higher risk of associated with doing business in an anonymous
What kind of equipment do I need?
Unlike a retail
account that requires a physical point of sale (POS) terminal to collect
credit card data and process transactions, an Internet merchant account
gathers data electronically through your website’s shopping cart
system. There are two types of Internet merchant accounts: real-time
systems and delayed processing systems.
In a real-time
system, once a customer enters his or her credit card information on
your website, that information is transmitted to the credit card issuer
via a special service provider called a gateway.
The gateway offers
additional security features, such as address verification, and helps
reduce the incidence of fraud. Once the transaction information is
received by the credit card issuer, it is authorized and a transaction
number is assigned.
transmits the approval – or a notification that the transaction has been
declined – back to the website and, for approved transactions, an
electronic receipt is issued.
At the close of
business, the merchant account collects transaction information for that
day, deducts any applicable fees, and transfers the appropriate amount
of cash from the credit card to the business bank account. This is the
most common type of Internet merchant account, and the one most familiar
to both business owners and consumers.
In the delayed
processing account, credit card information is still entered via your
website, but rather than being instantly processed, the information is
stored for later processing, usually at the end of the business day.
At that time, a
business employee collects the data from the account and enters it
manually into the store computer. From that point on, the processing
steps are the same. Because it relies on an actual person to enter each
individual transaction, this type of account is best only for small
businesses doing low daily sales volumes.
Mail order and
telephone order businesses often use delayed processing systems. Because
there is less reliance on the merchant account provider and gateway
provider to handle transactions, delayed systems are almost always
associated with lower fees and costs.
What fees are involved?
Depending upon the
type of account you select, your fees will vary. Basically, all
merchant accounts can expect to see two types of transactional fees: one
based on the amount of an individual transaction, and one that is the
same for each transaction.
In addition, your
account will likely have a daily fee that covers the cost of
transferring funds and maintaining bookkeeping activities associated
with your account. Most accounts also have monthly fees, and some still
maintain an annual fee. Some account providers charges fees for the
reports they issue.
You can also
expect to pay an additional fee for your gateway provider, which may or
may not be provided by your merchant account service provider. If the
merchant account does not include its own gateway provider, it will be
up to you to select one. Be sure to ask your provider for a complete
list of all fees before signing your contract.
What do I need in order to apply?
For any merchant
account, you will need to have a business license and a business bank
account. This bank account will receive all of the proceeds from your
credit card sales. Of course, you’ll also need a website with a shopping
cart system installed.
are an easy, affordable solution for your online business that can have
you competing with big corporations in no time. Take some time today to
explore your options and take the next step toward growing your