Merchant accounts are an ideal and easy solution for businesses that hope to attract a bigger share of customers and enhance their profit and earning potentials. By accepting credit cards, your business can gain significant benefits that can add substantially to your bottom line. And the good news is, no matter where your business hopes to make sales, there’s a merchant account option that’s right for you.
The following guide offers a brief description of the types of merchant accounts available today.
Retail merchant accounts rely on the use of a terminal to accept credit card information. Today’s credit card terminals, called point-of-sale (POS) or “swipe” terminals, are connected by a dedicated telephone connection to the account provider, which transmits collected card information directly to the credit card issuer.
Once the card issuer receives the information, it compares it to the card information on file, ensuring the card has not been reported lost or stolen and is not expired. Next, it makes sure there are enough available funds in the account balance to cover the costs of the transaction.
When these factors are confirmed, the card issuer assigns an identifying number to the transaction and then returns an approval message to the terminal. At the retail end, a receipt is issued and the transaction is complete.
Behind the scenes, however, the merchant account adds the transaction to its daily tally and records the transaction number. At the end of the day, the credit card sales are added up and any applicable fees and costs are deducted from the balance.
The remaining amount is then transferred to the business bank account that has been associated with your merchant account. Because retail sales require the purchaser to be present at the time of the sale, these accounts are generally associated with the lowest incidence of fraud, and so usually have the lowest costs of all of the merchant account types.
As the name implies, these accounts are used for companies doing all or part of their sales over the Internet. The basic principles of Internet merchant accounts are the same as those for retail accounts: credit card information is gathered and transmitted to the card issuer, who approves or denies the sale, and sale proceeds are transferred to the merchant bank account at the end of the business day. However, because no POS terminal is used, there are a few additional steps.
First, Internet accounts can be either real-time or delayed processing accounts. In a real-time processing situation, the sales are processed automatically. These accounts use a gateway provider in lieu of the POS terminal. This service aids in the transaction process and provides additional protection against fraud, which tends to be more common with Internet sales than with retail sales. In a real-time system, the amount of the sale is immediately withdrawn (or held back) from the credit card account being used for the sale.
Because they are entirely automatic, real-time systems are ideal for businesses expecting large daily sales volumes, as well as for businesses that do not want to be involved in online sales processing.
A delayed processing system collects credit card information just like a real-time system. But instead of sending that information to the card issuer and processing the transaction automatically, the information is stored for later retrieval by the business owner or sales person, who then must re-enter the data into a computer or other terminal for processing. These systems are less costly than real-time systems, but because they need a person for the final entry process, they are not a good choice for businesses with large volumes of daily sales.
MOTO is an acronym for “mail order and telephone order,” and that is what these accounts have been designed to accommodate. Like the delayed processing system described above, these systems require a business owner or sales representative to enter credit card information as it is given over the telephone or provided in mail order forms. Once entered into a computer keyboard or other terminal, the information is processed as with the retail merchant account.
These accounts are the newest option for merchant account holders. Mobile merchant accounts rely on the use of a laptop keyboard, cell phone keypad, remote and portable terminal, or other mobile device to gather credit card data and transmit it to the Internet via a wireless connection.
In addition to keypad entry, some portable terminal attachments feature swipe slots just like the retail terminals. These accounts are ideal for businesses that work on the road, such as contractors, as well as for businesses that hope to attend conventions or trade shows where sales may be made. Mobile merchant accounts work much the same as real-time Internet merchant accounts.
