Increase Your Business Cash Flow With Merchant Accounts
Merchant accounts allow businesses to accept payment for goods or services via credit cards. They are contracts between an acquiring bank who extends a line of credit to the merchant.
Did you know that customers are more likely to purchase from businesses that offer credit card facilities? Statistics show that businesses using merchant accounts can see an immediate increase in the number of sales. These statistics are based on the average cash sale being only $9, while the average credit card sale is approximately $40.
Regardless of the type of business, the availability of merchant accounts will definitely improve your cash flow in several ways. Below are some benefits for using merchant accounts:
- Having credit card facilities means you can offer customers the option to purchase on the spot.
- Merchant account processing fees are often lower than check transaction fees.
- Debt collection problems becomes an issue for the bank, not you.
While there are obvious benefits to having merchant account facilities in your business, there are also some drawbacks to consider.
- You will need to protect your business against instances of credit card fraud.
- You may need to examine and possibly revise your policies concerning charge-backs and refunds to minimize damages.
- If you accept credit cards on your website, make sure you’re using fraud protection measures to minimize fraud, theft and scams.
Setting Up Merchant Accounts
Setting up a merchant account is a relatively simple process. You will need a company bank account for any credit card purchases to be deposited into. You’ll also need to lease processing equipment and/or software to process transactions.
If you intend to process credit card payments online through your companys website, then youll need to take the extra step of registering with a payment gateway like VirtualNet or CyberCash. Always check that the merchant account software you have will be compatible with your online payment gateway.
Merchant Account Comparisons
Before you call your bank to get a merchant account, take the time to compare the options and offerings of several different banking institutions, in addition to merchant account providers. Fees and charges often vary greatly, so its very important to check what you’ll be charged and what fees are likely for each transaction.
For instance, fees might include initial start-up costs, equipment monthly lease fees, sales volume costs, transaction and processing fees. When looking at potential merchant account providers, be sure to ask for a written list of all the fees you’re likely to incur so that you can accurately compare them with other vendors.
Merchant Account Charges and Fees
Different providers may charge some type of application fee. This can range from $0 up to $100, sometimes more depending on your lender.
You may need to pay for your software, which can have an initial cost around $100 or more. Once installed, you may have to pay a monthly licensing lease, which can vary from $20-$50 a month. This, too, will vary and depend on your lender.
In addition, you will incur transaction fees that can range from $.20-$.50 per transaction. While this doesn’t sound necessarily high, this can really add up if you process a large number of transactions.
Other fees to ask about with any potential merchant account provider are charge back fees, minimum usage fees, statement fees, annual fees, close-out fees and account keeping fees.
David P. Montana has been a noted industry expert, business consultant and author in commercial collection agencies and other business services for three decades. Read additional valuable tools and resources, including negotiating tactics, and important red flags and pitfalls to avoid when considering merchant accounts.
