3 Common Merchant Account Jargon Explained
15 June 2010
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Shopping around for the right merchant account provider? There are lots of options available, opening doors to many possibilities for a new online merchant, but how well do you know your Internet merchant account jargon? Here are some common terms explained so that you will get a clearer idea of what your provider is talking about.
1. Settlement Time
This period is defined as the duration of time between your customers’ credit cards being charged for the transactions they make and the time you actually see the cash in your business account.
Typically, this period of time can be:
Instantly – Some merchants have been known to enjoy relatively short settlement time, and sometimes even seeing the funds in their accounts instantly!
Averagely short time – Reputable merchant account providers will ensure their online merchants receive the cash in as little time as 2 or 3 days
Longer settlement time – Third party processing companies typically use up 2 to 4 weeks to send over your cash
Extreme cases – And sometimes, online merchants reported a very long settlement time of up to 3 months due to inefficient merchant account providers handling their high risk accounts
To speed up the settlement time, there are 2 options for you to consider:
Direct deposit – This method may cost you a little bit more but you need not worry whether your funds are deposited safely or not. This option is usually very reliable and you will see your funds in your account in as little time possible
Via check posting – This technique is fast becoming unpopular because most merchants do not want to wait for their checks to clear, so they usually opt for the first technique which will allow for faster funds delivery.
2. Discount Rate
Most merchants think that discount rates will help them shave off some provider fees – Obviously this is not true. Fact is, discount rates are created so that providers are given a certain percentage on top of the fees they already charge. This can be as little as 2% or as high as 10% charged by third party processors. The fee is based on a percentage of each transaction between a merchant and his customer.
Discount rates are immediately obvious to online merchants but you typically need to negotiate for a low rate to avoid overpaying.
However, if your provider is throwing in other conveniences or merchant account features free of charge, the slightly higher discount rate may be more worth it than you think. These features may include:
- Shopping cart
- Security features
- e-Commerce solutions
- Digital delivery software
- Other account enhancements
Additionally most merchants prefer paying discount rates rather than a high fixed monthly fee to their providers.
3. Additional Fees
For seasoned merchants, the phrase “additional fees” may spell trouble due to the fact that these charges are not always clearly outlined in some merchant service providers’ pitch. For instance, some providers may attract interest merchants with zero setup fees but later on, these merchants may need to pay as much as $200 worth of software.
Your friendly sales representative from the service provider should be able to give you a walkthrough on their rates and fees. If they reluctantly refuse, they something smells fishy and you should move on to other providers.
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