Do You Know Which Merchant Account Suits Your Business?
A merchant account is a platform that facilitates the processing of payments to business people via debit cards, credit cards, gift cards, and checks. It is a line of credit that you will routinely settle with your bank along with a payment processor like VISA or MasterCard. The type of merchant account you need for your business depends on the type of industry and business model.
There are two main types of merchant accounts; card present, and card not present. Card present requires a customer to present a credit card to a vendor during a transaction. It is a low-risk type because the customer is always present during a transaction and signs to approve the transaction. These types of accounts are perfect for physical retail outlets and they attract low fees and rates.
Card present types can be further categorized to meet specific needs. E.g. a wireless merchant processing account which requires a portable credit card machine. Its other characteristics are similar to those of the regular account type and they are very convenient for companies that make transaction remotely, like home repairs.
A store and forward account type allows credit card information to be held in a handheld device, but does not process the information. It is suitable for enterprises that are mobile and do not need credit card acknowledgement, and have low ticket value and minimal credit card rejections.
The other types of card present accounts are meant for specific enterprises. For example, a grocery merchant service account for outlets that sell perishable goods, but no gasoline. A lodging account for businesses within units where customers sleep over. A restaurant merchant account that allows a business to authorize a customer’s card, and then go back to adjust for gratuity.
A card not present account does not require a card for a transaction to happen. They are suitable for Internet-based businesses, telephone sales, and mail order enterprises. It is very difficult to guarantee that a person was present during a transaction with these type of accounts making them very risky and highly charged. They are categorized differently as well.
Internet accounts are utilized by e-commerce enterprises to make online transactions in real time. A transaction is made via an electronic gateway which approves or declines a credit card rapidly.
Mail order accounts require the customer to fill out all their credit card details on an order form that is then sent to the merchant for processing. Merchants are responsible for keying in the credit card information and running them for approval, after which they deliver orders if the cards are okay.
A touch-tone telephone account usually prompts a customer or vendor to enter credit card information over a touch-tone phone. This type requires no credit card equipment. An authorization number is provided verbally and should be noted down on a receipt for the customer. It is considered risky and attracts high fees.