e-commerce 101 - Merchant Accounts

What is a merchant account?

A merchant account is an agreement with a merchant account provider, sometimes called a merchant service provider, required to conduct credit card-based transactions. With a merchant account, the merchant agrees to honor certain obligations and the merchant account provider agrees to coordinate the transfer of monetary funds through the financial process. Merchant accounts can be obtained from merchant account providers like banks, financial institutions, processing gateways or from independent service organizations.

There are several types of merchant accounts, those for use in "brick & mortar" retail establishments, those for use in mail and phone order businesses, and those for use with Internet storefronts. The terms and fees vary widely, both among and within the types. Generally speaking, the fees grow larger in accordance with the perceived level of fraud risk - in other words, your bank may charge less for a retail POS merchant account, where shoppers present their credit cards to you in person, vs. an Internet merchant account, where you have no personal interaction with the shopper.

Do I really need an Internet merchant account?

While not everyone needs an Internet merchant account, there are many benefits to having one. First and foremost, an Internet merchant account will enable you to accept one of the most popular methods of payment for e-commerce transactions, credit card. Multiple payment options make it easier for your customers to complete an order.

You can still use StoreSense even if you choose not to accept credit cards. StoreSense can accept many other means of payment, including electronic checks, traditional paper checks and money orders. You can also leverage the integrated services offered by PayPal. PayPal will allow you to accept credit cards from your customers without requiring a merchant to have an Internet merchant account. StoreSense Pro even includes options for accepting COD, certified checks, department orders and purchase orders.

How much does a merchant account cost?

Merchant accounts typically require costs for the processing software and for each transaction. Rates, account fees and transaction fees vary widely, and may include application, set-up and monthly fees, discount rate (percentage of each transaction, typically 2-3%), flat fee per transaction, and even chargeback fees in instances of consumer-disputed charges. Some of these charges are avoidable, so do your research carefully, evaluate all of your options and be cautious of hidden fees.

Can I use my existing merchant account?

If you already have an Internet merchant account, you can easily transfer it over. If you want to have real-time credit card processing with your current merchant account, you should be able to leverage it if it is compatible with one of the payment processors already integrated with StoreSense. View a list of the currently integrated payment processors. Check with your merchant account provider regarding conversion and compatibility issues.

If your existing merchant account is not an Internet merchant account, you may or may not be able to use the account to complete online credit card transactions through StoreSense. Please check your merchant account Terms of Service agreement carefully to determine whether you can integrate the account with your online store.

What if I don't have a merchant account yet?

No problem! Many of our reseller partners offer merchant account services too. Some StoreSense partners even offer merchant account application built into the StoreSense application that will allow you to apply online. Upon approval, your merchant account will be automatically generated.

What should a small business owner consider in establishing a merchant account?

Research your options, as they are numerous. Consider your anticipated number of transactions and the dollar value of those transactions when comparing your options. Evaluate all of the terms of an agreement, not just the discount rate. Scalability should also be an important consideration. You may not need real-time credit card processing to start. But, as your business grows, it may become a necessity. Make certain that the merchant account supports the real-time processing services offered by one of the payment processors/gateways already integrated with StoreSense. View a list of the currently integrated payment processors. When the time comes, you want to have the ease and freedom to leverage advance functionality without having to establish new merchant services accounts.

What are some resources for learning more about merchant accounts?

E-Commerce Guide (Internet.com)