Merchant account enables you to accept 
credit card payment right at your site.

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Online business merchant account 
application and fees

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What to expect while shopping for Merchant Account?

90% of all Internet payments are made by credit card, you should get yourself set up with this payment option as quickly as possible. Online businesses can increase sales by as much as 400% right after they gave their buyers this convenient way to pay.

You have two options to accept credit card payment:

  1. Acquire your own Merchant Account

  2. Use a third party credit card processor

A Merchant Account is an account at a financial institution that allows you to accept credit cards.

The easiest way to get merchant account is to apply through a Merchant Account Provider, a company that helps set you up with the proper merchant account, and provides the software and hardware you need to accept credit card payments right at your web site. They may also provide other payment acceptance services, such as debit card and online checks.

A merchant account provider acts as an intermediary between you and the direct processors. I recommend using a merchant account provider to match your needs and situation to the right supplier.

The merchant account provider will open an account for you at a financial institution, a bank with whom they're partnered, that can handle Internet transactions, and approves your credit history.

When it comes to deciding which Merchant Account Provider you wish to deal with (there are many out there) the one factor that influences most people is the cost. Obtaining the facility to accept credit card payment can be expensive, so make sure you compare different providers in order to get the best deal. And read all the fine print too - you may find some "hidden" charges here that are not mentioned elsewhere.

Here's a basic outline of the approximate rates and fees associated with merchant accounts:

Application/Setup: $0-100+ (one time fee)

All merchant accounts will have some kind of set up or application fee, which is usually at least $99. Where there is not an initial fee, you can be sure that the provider will make up the difference on a software or equipment sale, or by otherwise marking up the transaction and service charges.

Hardware/Software: Purchase: $99+ Lease: $20+/month

Stay away from leases if it's at all possible. It's always better to purchase from the beginning than pay a lease for the next 12, 24, or 48 months. Leases are very hard to break once you've agreed to them. With a lease you can end up paying as much as 3 times or more than if you'd purchased the solution outright from the beginning.

Discount Rate: 1.49-4% per transaction

This is the fixed percentage amount that's deducted from the purchase price. Lower discount rates are available to retail establishments, while higher rates are applied to Mail Order/Telephone Order (MOTO) and Internet based businesses.

The instances of credit card fraud are much lower in retail situations, so banks are able to charge lesser percentages to these businesses.

Transaction: $0.10-0.50 per transaction

In addition to the discount rate, a transaction fee is also deducted from the purchase price. As with discount rates, transaction fees are lower for retail businesses, and slightly higher amounts are charged for MOTO and Internet businesses.

Address Verification System (AVS): $0-0.05 per transaction

The AVS service checks that the billing address given by the customer matches that which is associated with the credit card.

This service only works in the US - currently there's no AVS service available for credit card holders outside the States.

If you opt not to use AVS, VISA and MasterCard will not support your transactions, and they'll charge you an additional 0.17% to 1.25% on those sales. Most merchant accounts come with AVS at no extra charge. If there is a charge, it's combined with the per-transaction fee in most cases.

Monthly Minimum: $20 - $25 per month

This fee is based on your transaction and discount rate fees that are charged on your credit card sales each month. For instance, if your bank charges $25 as a monthly minimum, the transaction and discount rate fees collected by the bank must equal or exceed $25 each month. If this is the case no monthly minimum will be charged. However, if the fees collected for that month do not meet the $25 minimum, you'll be charged the difference.

Gateway Access: $0 - $25+ per month

As in some cases, the Secure Payment Gateway provider is a separate company from the Merchant Processor, they charge separate fees. An access fee is payable for each month that your account is on their system. Find a smaller provider or a merchant processor with their own free gateway to get the best deal, which in some cases can mean free access.

Statement: $10 - $15 per month

At the end of each month you'll receive a statement from your processing bank, which lists all the transactions that occurred in that particular month - not unlike your credit card or telephone bill. In many cases the statement is displayed online, so there is no statement mailed, and this fee may be called an Account Maintenance or Technical Support fee instead.

Chargeback: $5 - $25 per instance

A chargeback occurs when the cardholder disputes a charge on their monthly credit card statement. A large number of chargebacks can cause you to have your merchant account dropped totally, and can leave you in a bind when you try to secure another merchant account for your business. If this is the case you may be unable to get another merchant account for several years.

Reserve: Fees vary - ask providers for details

Some providers will require you to hold a reserve account, the balance of which is determined by your business's estimated sales receipts. A reserve is almost always charged to merchants who aren't based in the US and who are trying to obtain a merchant account in the States. Also, businesses that complete a high volume of sales each month may be charged a reserve fee.

In most cases, the reserve fee is used to cover the cost of any chargebacks on the merchants account.

If you need a merchant account, I recommend Merchant Express, a reliable and friendly merchant account provider with reasonable price.

Click here for more information on third party credit card processors.

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