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Tips for businesses to save money on merchant accounts

In this age of technology, saving money on merchant accounts is convenient and efficient for any business. The pros outweigh the cons.

credit card being swiped at a point of sale
Image: Unsplash

A merchant account is a business bank account that allows a business to accept and process electronic payments and credit card transactions. These accounts depend on agreements between a merchant bank and a company. 

Especially for eCommerce businesses, merchant accounts are necessary for effective and safe transactions. However, merchant accounts and payments are not limited to eCommerce businesses only.

How do Merchant accounts work?

Merchant accounts serve as intermediaries between a business and its customers. A customer pays for a product, and the payment is deposited into a merchant account, then transferred to the business bank account.

Do businesses require merchant accounts? Are there are cons to using these accounts? This article provides tips for businesses on matters related to these merchant accounts.

Merchant payment services

Any business looking to save money on merchant accounts needs to know the popular merchant payment services available. They include:

  • Retail merchant accounts
  • Internet merchant accounts
  • Mail order/Telephone order merchant accounts

Retail merchant accounts deal with businesses transacting physically, unlike internet merchant accounts that transact online (eCommerce). Mail order/Telephone order merchant accounts are designed for telephone and mail companies.

credit card online shopping

Image: Unsplash

How to obtain a merchant account

Getting a merchant account approved requires a business to meet specific criteria as listed below:

  • Business history
  • Personal credit history of the business owner
  • Type of business
  • Length of time in business
  • The previous holding of merchant accounts

Cost and fees

How much will a business owner have to part with in terms of prices? Are charges constant, or do they vary?

It is essential to understand that some account fees are risk-based, depending on the criteria mentioned above on account approval. However, some fees are constant among the various merchant accounts. For instance, a service provider may charge your business a monthly fee.

Also, transaction fees apply across all merchant accounts. The account charges your business a percentage for the actual transaction and a flat fee for each sale. If your business processes paperwork of your transactions, a statement fee applies.

As a business, how can you avoid hidden fees? Ensure that your provider offers flat-rate pricing. Also, keep tabs on any additional fees.

Others standard fees include:

  • Application fees
  • Setup fees
  • Cross-border payments
  • Discount rates
  • Rental payments (for a credit card terminal)

How do merchant accounts relate to banking?

Many banks do not offer merchant services; they contract to a third party. Nonetheless, this may come at an extra cost for your business.

However, opening a merchant account through your bank also carries an advantage. You may get a favorable review for your merchant from your bank due to your transaction history.

It is advisable to always choose a company that provides you with the specialized merchant services that you need. You have to cut out any middle-men.

PCI compliance

PCI Data Security Standards are rules set to ensure credit card security through secure processing of customer payments. You should consider getting compliant as soon as possible as it is a requirement, especially after getting a merchant account.

Any merchant who does not advise you to get PCI compliant is not worth banking with. Not being PCI compliant attracts a fine.

It is a simple process that entails:

  • Completing an SAQ self-assessment questionnaire
  • Passing PCI security scan
  • Ensuring credit card security

Are there any advantages to having merchant accounts?

These accounts reduce cash handling costs. The probability of losing cash through theft and carelessness becomes lower.

Also, transactional security is assured since merchant accounts have setup data protection measures for the sake of customers.

Other considerations to use merchant accounts

If you have a physical storefront as well as an online business, it is possible to use the same merchant account for your transactions – a cost-effective measure.

Ensure that your paperwork is easily accessible, especially before application — for instance, tax IDs and your business license.

Cons of merchant accounts

Merchant accounts are reliable, effective, and efficient transaction platforms. However, one major challenge for businesses may be the additional charges that can be associated with the account.

Also, smaller businesses may have to spend more compared to larger ones due to risk. However, as the business grows, this starts to change.

With a good merchant and personal research, these cons may not affect your business as you get to know how to maneuver around any hurdle.

Conclusion

In this age of technology, saving money on merchant accounts is convenient and efficient for any business. The pros outweigh the cons, and the risk is worth taking.

Have any thoughts on this? Let us know down below in the comments or carry the discussion over to our Twitter or Facebook.

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