Author: John Conde (Google+)
Accepting payments is a simple process when the only form of payment you accept is cash. It gets more complex as you add additional forms of payments like checks or credit cards. While some businesses can survive, and even thrive on a cash-only basis, the reality is most businesses cannot hope to survive much less thrive without accepting credit cards. Credit card payments comprise the majority of payments after cash and is the defacto method of payment online. This makes accepting credit cards imperative for most businesses.
Unfortunately it seems that handling cash is taught far more frequently and in detail then accepting credit cards. Merchant accounts are far more complex then most merchants know. The merchant services industry generate billions of dollars in revenues each year and there are a lot of players on multiple levels all trying to capture a piece of the pie. Each player adds a layer to the process of accepting credit cards and increases the complexity of not only the process of accepting credit cards but adds to the cost structure as well. To make it worse, getting good information is difficult to accomplish. Half of this is a result of the majority of information available about merchant accounts are made available by merchant account providers. This means what you are reading is at the very least tailored to bathe their company in a positive light or can be a blatant sales ad disguised as "an informative article". In many cases the merchant account providers do not want you to know how it all works as an educated merchant will be more difficult to sell an average rate plan to. After all, knowledge is power.
The see an example of how difficult it can be to get reliable information read our blog post An Example Of Why Merchants Find It Hard To Get Good Information.
The following article has been written to explain the many mysteries surrounding merchant accounts. It tackles several aspects some of which are usually transparent to the merchant. The goal is to educate you about merchant accounts so you can make better decisions about the merchant account you currently have or the merchant account you are seeking. While it doesn't go so far as to explain how you should shop for a merchant account (that article is in the works) it will give you enough information to make informed decisions. Areas we will cover are:
Find out who the players in the merchant account industry are and what their role in the process is. We start at the top with the credit card companies themselves (Visa, MasterCard) and work our way down to the sales agent who establishes your account.
To better understand how rates and fees are determined and charged it is important to understand how a merchant account works. The type of merchant account and fees charged are affected by the environment the credit card is processed and even the kind of credit card is being used to make the purchase. We will look at the elements of a merchant and transaction to get a better understanding of how these factors affect a merchant account.
The most important, and yet the most confusing, aspect to accepting credit cards are the rates and fees associated with having a merchant account. Some fees are "standard" while others are not. Some companies use different names for essentially the same fee. Some rates look better then others but are they really? We will look at the most common fees and explain when and how they are charged.
Just understanding how the rates and fees of a merchant account are charged does not make a merchant educated about merchant accounts. You need to understand the fine print of the contract you are signing as well as how the processing bank will view your account with them. Their outlook on your merchant account can mean the difference between smooth sailing and money being held for months or years. We will take a look at what factors they are most concerned with and how you can ensure your merchant is not a burden to your business.