What Are Merchant Accounts and Why Should You Want One?
You've decided to get yourself into an e-commerce business,
or you're an established company who wants to sell goods and
services online. While browsing around your favorite sites,
you've noticed a plethora of adverts which grab your attention. "Take
Credit Cards Now", they scream, "0% Commission!".
Fighting your way through the jungle of e-commerce hype can
be difficult, but we want to make it simple for you. You need
a merchant account? You want to sell on-line? Let us help you
find some answers to those nagging questions.
Why Accept Credit Cards? Who cares?
Your customers are all using credit cards to make purchases
on the Web already, so don't ignore the demographics!
Retailers refusing to enter the e-commerce arena are probably
digging themselves an early grave. You know you want to make
money using the Internet, especially if you already have an
existing site promoting your business. Take it a step further,
and actually sell your products online.
Are you worried about the cost?
E-commerce site are not cheap but are significantly cheaper
than opening a new shop. It is also an investment which in
most cases will pay for itself in a few months.
What is a Merchant Account?
A Merchant Account involves a special type of arrangement
with a bank or clearing house that allows you to accept credit
card payments into a special bank account (your "Merchant
Account"). The results of any credit card transactions
passed through your online authorization company are then,
credited to your account if the transaction is approved.
Why use a Merchant Account?
Having a Merchant Account is the most cost effective way of
accepting payment by credit card. Put simply, once you have
a merchant account (and a company who will authorize the payments
online), you will be able to accept credit card numbers on
your site, and then receive any payments due to you. It's as
simple as that.
How does it work?
Getting the money from your customers credit card and into
your account involves several stages. The first is actually
approving the sale and taking the customer's credit card details
on your Web site. Next, the card has to be verified and approved,
to check that it's not been stolen, or has expired. Your Merchant
Account company may provide this service, or you may choose
to use an online authorization company. It's wise not being
too cheap with companies who provide authorization services,
since accepting invalid credit card transactions could cost
After the card has passed rigorous security checks, your merchant
account provider (or online authorization company) then passes
the details to their credit card processor who debit the customer's
credit card and deposit the money into your merchant account.
This chain of events takes between 1 and 2 days with most merchant
account providers, although the features that your chosen provider
offers may turn out to be different.
The other method
While some Merchant Account Providers offer an 'all-in-one'
solution where they, supposedly, handle your merchant account
and the processing of the credit card orders, you may prefer
to let separate companies handle each section. For example,
you may let one company provide the online authorization service,
and get a merchant account yourself with your chosen bank.