Chances are, you’re either an existing business looking to reduce your credit card processing fees, or you’re a new business just getting started and applying for a merchant account for the very first time.
Well, if you’re one of those new businesses, you may have a few questions about what’s involved in accepting credit cards. So this page is a merchant account primer for you if you’ve never applied to accept credit cards before and want to know more about the process.
Merchant Accounts Are Like Loans
Accepting credit cards is a lot like asking for a loan. That’s because your bank is directly liable to the Associations (Visa, MasterCard & Discover) for any chargebacks or fraud losses for 6 times your monthly processing volume . So, for example, if you apply for a Merchant account to accept Credit Cards for up to $25,000.00 per month, the typical Bank will
underwrite that account as if you were applying for a loan of $150,000.00 As a result, they will usually require financial statements, Bank statements, Tax returns and good credit in order to approve the merchant account.
(Sounds like a lot of requirements, right? Well, you’re right. But if you don’t meet all of those requirements, don’t worry. We can help. See below.)
Who is who?
There are many entities involved in a typical credit card transaction. So let’s find out about them all, one by one:
- Buyer — The person who wants to make a purchase.
- Merchant — That’s you, the company that is selling its goods or services.
- Merchant Services Company (ISO) — The Merchant Bank may use a merchant services company like Worldwide Merchant Services, A registered ISO/MSP as a marketing arm to find new customers and create relationships with the Merchant Bank.
- Merchant Bank — It’s the Merchant Bank that acquires and processes the Credit Card purchases that your customers make.
- Business Bank — The Bank that receives the Merchant’s funds from the purchase (where you currently bank).
If you are running a retail store, there’s one other piece you’ll need:
- Credit Card Machine — Sometimes called ‘credit card terminal equipment‘, this device is what you use to swipe your customers’ credit cards. Just tap a few buttons, swipe the card, and get a signature. It’s as easy as that.
And if you are running an online business, there are two other pieces to the puzzle:
- Shopping Cart Software — The first piece is the shopping cart software. The software controls your buyer’s shopping experience at your website.
- Credit Card Internet Gateway — When an online buyer “checks out” with his shopping cart, the cart needs to accept the credit card information and send it to the merchant bank. That transaction is handled by an Internet processing gateway”. (We recommend Pay-Gate.
And now that you know who is who, and what is what, let’s learn a few new words.
Words To Know
- Discount Rate — A fee paid by merchants for the ability to letting customers pay by credit card. This fee is usually in the range of 2% to 5%.
- Per-Transaction Fee — There is usually a small, flat fee for each transaction processed, usually just a few nickels.
- Monthly Minimum — Some banks will expect a minimum monthly total of the processing fees. If you don’t meet your monthly minimum, you’re charged a small fee.
- Statement Fee — A fee for preparing your monthly statement.
- Internet Gateway Fee — You’ll be paying a small fee to maintain your Internet gateway relationship.
- Reserve — For new or higher risk businesses, the banks sometimes may require a deposit from you in order to ensure them against charge-backs or refunds. This reserve protects the banks in case of potential unpaid losses. (It’s more a reflection of your business type and customer type, rather than a reflection of you personally.)
Now that you know more about accepting credit cards, fill out our Quick-App right now. As soon as we get your information, we’ll call you back to learn a little more about you and then get to work on choosing the best merchant bank for you, and getting you the best rates possible. Go ahead. Do it now.
