I wanted to write about a subject that is almost always near the top of every small business owner’s mind, or should be. Money. There was a time (not so very long ago) when the customers of a local business could “charge it” to an individual account managed by the business. This worked well when the vast majority of customers paid their bills. However, if a lot of customers stopped paying their bills, it resulted in serious cash flow problems for the business owner.
Today, small business owners can’t afford to take those kinds of risks. Enter credit cards and merchant accounts. Credit cards have had a profound impact on business. In fact, businesses that accept credit cards can experience increases of up to 400% in revenue over cash sales.
Many business owners realize that accepting credit cards is essential to staying competitive, but don’t know what options are available. There are many types of merchant accounts that can make a customer’s experience more efficient and pleasurable while potentially saving the business money on transaction fees.
It is important to find a merchant account provider that offers a variety of services at affordable rates. One such merchant account company is North American Bancard. They offer several options for credit card processing. Many of those options will be explained in more depth later in this post. There are also companies like PayPal and Google Checkout that handle specific types of merchant accounts.
When most people think of a merchant account, they envision a terminal that swipes credit cards at brick and mortar businesses. Since this is the most visible of the options for accepting credit cards, it is easy to understand why so many people think it is the only option for a merchant account. In fact there are many options available that cater to an individual business’s needs. The following list will help you determine which type of merchant account will work best for your small business.
Wireless Merchant Accounts
These types of merchant accounts are the latest in credit card processing innovation. They are gaining in popularity with businesses that rely on commerce that take place outside of an office or brick and mortar establishment. One example is a food vendor at a baseball game that accepts credit cards with wireless terminals. This is a perfect solution because fans often run out of cash.
Retail Merchant Accounts
If your business model revolves around a physical location, then a retail merchant account may be necessary to compete with other businesses (i.e. restaurants, dry cleaners, and other stores). After opening this type of account, retailers receive a countertop terminal that is used to swipe customers’ credit cards. After swiping the credit card, the terminal retrieves information associated with the customer’s account. Transaction fees are typically lower due to the lowered risk of fraud since the transaction is face to face. To further reduce fraud and keep their transaction fees as low as possible, many retailers also require identification along with a credit card. Although the transaction fees are lower, the monthly fees are higher with retail merchant accounts. Most merchant account companies offer retail merchant accounts.
Internet Merchant Accounts
Businesses that rely on e-commerce have to be able to accept credit cards if they want to generate revenue. Depending on their sales volume, they can either use a virtual terminal or a weblink gateway.
Virtual terminals are most suited to businesses with a lower volume of internet sales. The credit card information is entered into fields on a website and is transferred to the site administrator. The administrator then verifies the credit card information manually. The verification process can be performed from any computer with access to the internet.
Weblink gateways are for businesses that experience a high volume of sales from the internet. The verification process is automated by the gateway provider. These accounts are more expensive due to the automation but there are far fewer errors..
In general, internet merchant accounts cost more to open due to the increased risk of fraud, since the transaction is not face to face with the customer. Merchant account providers want to protect themselves from losses related to fraud. As e-commerce grows, so does the number of merchant providers offering this service. PayPal and Google Checkout are forms of internet merchant accounts that offer increased data protection.
Mail Order and Telephone Merchant Accounts
Although considered “old-fashioned”, it is still important to offer this option to appeal to audiences that prefer these methods. Some people just feel more comfortable talking to someone on the phone when placing an order for a product or service. Transaction fees are higher for these types of accounts.
High-risk Merchant Accounts
Businesses that are exposed to greater instances of fraud and chargebacks are classified by merchant account providers as high risk. While they can accept credit cards, it involves higher fees. Some examples of high risk businesses are pharmacies, casinos, adult stores, and travel agencies.
Offshore Merchant Accounts
If a business accepts credit cards from international customers, offshore merchant accounts might be the best option to protect them from fraud. These types of providers have verification procedures that wouldn’t be available in this country. The benefits of opening up an offshore merchant account include lower taxes and deposits. They are also easier to open.
It is not enough for a small business to offer great products and services at competitive prices. In order to stay competitive in the global marketplace, it is incumbent on small business owners to do everything they can to make it easy for customers to do business with them. Rest assured, if you are not making it convenient for your customers to do business with you by accepting credit cards, your competitors will.
If you would like to contact me, you can do so by visiting my LinkedIn page or emailing me at mike.clough@bestbizpractices.org.
Posted by: Mike Clough
