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Business Tips Choosing The Right Merchant Account

By Jim Hildebrand on April 16, 2011

Different businesses have different core competencies. Some are skilled at providing excellent customer service, while others provide a product that is unmatched in quality. But almost every company has one thing in common with its competitors: they all have to get paid by their customers or clients in order to survive.

More and more, that means accepting credit cards for goods or services. But like most marketplaces, there is a wide array of merchant services providers that can process credit card transactions for businesses. So how can a business owner choose the merchant account that is ideal for him or her? Here are a few tips.

Select the right account type.

There are many different types of business arrangements (or merchant accounts) that are available to a company. Retail accounts involve face-to-face purchases between a customer and a clerk or proprietor. Internet accounts are structured to allow Web-based businesses to accept credit card payments online via their websites or a separate "shopping cart" site. Card Not Present accounts are designed for companies which conduct business by phone, fax, email, postal mail or any other method where the card itself is not viewed by the employee. Mobile accounts can be tailored to meet the needs of companies whose representatives accept credit card payments away from their home bases (like plumbers or carpet cleaners). And seasonal accounts can be set up for a business that only operates during certain months of the year (like Halloween costume rental centers or snow blowing service providers).

Be aware of the cost structure of your account.

In addition to varying account types, there are also different ways that merchant services providers collect revenue from businesses. Generally speaking, most of these charges are recurring, per transaction or situational. The most frequently assessed fees are those which occur whenever a business authenticates a credit card payment. Merchant services providers either take a percentage of each transaction (known as the periodic rate) or charge a flat fee per transaction. They may also utilize a combination of both methods.

Like credit card accounts for consumers, the periodic rate can increase if certain criteria are not met by the company. In addition, merchant services providers can charge penalty fees for various reasons, such as failing to reach a predetermined minimum number or amount of transactions per month or falling behind on equipment leasing payments. Companies must especially be careful not to incur chargebacks, which are instances where the credit card holder disputes a charge by the company on his or her monthly statements. Merchant services providers tend to levy significant penalties for an inordinate number of chargebacks on a given account.

Educate yourself about the middlemen.

Like many aspects of business, merchant accounts incorporate different types of middlemen which serve to facilitate credit card transactions. In its most basic form, a consumer uses a credit card and the credit card company (like Visa, Master Card or American Express) gets paid. But these cards are issued by various banks (like Chase, Capital One, or Citibank), which set credit limits for cardholders and screen out non-creditworthy individuals.

These banks communicate with the merchant or company through an entity known as an acquirer. The actual credit card transactions are processed over networks and platforms which make up the required infrastructure that is necessary for authentication to occur. Finally, other companies, which are called independent sales organizations or member service providers, take care of procuring and operating the processing hardware and equipment, bookkeeping software and other card-related services. All of these entities take a cut of the revenue that passes from the consumer to the merchant.

Consider offering customers alternatives to traditional credit cards.

Though credit cards remain one of the most popular forms of payment, some consumers may wish to use other means to pay for their purchases. For example, a debit card transfers funds directly from a consumer's bank account into the company's account (minus all transaction fees) and requires a personal identification number to be entered before the transaction can be authenticated. Many merchants offer gift cards (also known as purchasing cards), which allow customers to use them only at their businesses. These cards usually contain a preset amount of funds.

Finally, loyalty cards can be used in conjunction with traditional credit card transactions to allow customers to accrue and redeem "rewards points" for savings on future purchases or even free gifts. Business owners do not have to offer any of these choices to their consumers in order to process credit card payments, but these cards can serve as additional incentives for a customer to patronize their business.

Merchant accounts are a lot like other business processes, including shipping, supply chains and accounting. Even though they aren't directly related to the buyer-seller relationship, they can cause countless problems and require large amounts of time and money if they do not function properly. That's why it is vital for a business owner to choose the perfect merchant services provider for his or her individual business.

Jim Hildebrand is a freelance writer who writes about a range of topics including merchant accounts.

Original article published on SooperArticles.com

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