Which Merchant Account? Merchant Account Services Explained
A merchant account is a specialized bank account set up to allow companies to receive funds through credit or debit card transactions. Unless an individual offers their goods or services for sale, it is highly unlikely they will need merchant account services. In fact, many individuals selling handmade goods or services on the internet often use a PayPal account to accept payment rather than setting up merchant services. In order to accept credit cards on location or through retail websites without PayPal, merchant services are required.
Contracts for merchant account services are entered into between a company and their financial institution. Often, third-party vendors may also be part of the agreement, because they will provide services or technology to allow collection of funds. By entering into any merchant services agreement, a company agrees to be bound by the terms of service made available by credit card companies who work with that merchant services provider. Regulations usually include provisions for ensuring customer credit card information is kept private, ethical collection practices and participating in chargeback procedures when charges are disputed.
Merchant account services usually include a variety of options for accepting and processing payments. Some options include:
- Point of sale machines for swiping cards,
- Online payment collection gateways for charging cards manually or systemically using retail software systems,
- Payment gateways where customers can enter their own payment information when checking out online,
- Processing of ACH or electronic checks,
- Ability to authorize credit or debit cards to ensure funds are available prior to finalizing a sale, and
- Funds transfer programs.
When searching for a merchant account provider, businesses should compare the services offered as well as fees. In addition to fees charged per transaction, merchant account services fees can include:
- Nuisance fees for multiple attempts to process declined cards,
- Charges for each authorization or verification request,
- Statement fees each month,
- Charges for not reaching minimum activity per month,
- Customer service or annual fees to cover the cost of call centers and other resources, and
- Chargeback fees associated with disputed charges.
There may also be costs associated with failures to comply with credit card industry regulations. For example, if failure to protect personal or private financial information for customers is discovered in an audit, a company may be charged thousands of dollars per infraction and lose merchant services privileges.
Companies should choose the merchant account services provider that is right for them. Some providers to check out include First Data Corporation, Merchant Account Express and Leaders Merchant Services. Large financial institutions like Bank of America provide client service representatives that can assist companies in setting up merchant accounts. Once you have a list of possible vendors, choose the one that offers the best pricing on the services you need.