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A merchant account is indispensable if you are running an online business. With the help of this account you will be able to collect the payments from your customers, who use their credit cards when shopping. However, if your business is classified as one belonging to the high risk category, you also need to apply for a high risk merchant account. This is a more expensive option, but since your businesses is more exposed to chargebacks than a business selling only books for example, the risk involved is much higher.

What businesses belong to the high risk category?

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Well, mostly pharmaceutical companies/retailers (especially OTC vendors), companies offering traveling packages (many customers opt out last minute for example and then you are obliged to offer refund), telemarketing related companies (you may end up with a lot of unsatisfied with their products customers, etc.), online accounts that operate on a membership basis (dating for example) or online gaming portals (online casinos).

The independent sales organization (or, ISO) is the one that will determine if your business is high risk or not, highly taking into account the estimates for chargeback and refunds. If your business sells diet pills mainly, which are considered Over the Counter medications, the risk of clients asking for chargebacks is quite high. Many customers may find that the pills have not worked well with their system (they did not loose weight as specified on the website ad).

If the banks consider that your business does not abide by some standards, rules and regulations (such as proper marketing, delivery or sale of these), then there is a higher risk for the banks to process these transactions from clients.

Potential costs for you as a merchant that are incurred with high risk merchant accounts

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If the client is unsatisfied with the products/services that you delivered, he/she may ask for a chargeback. This is quite a complicated process involving the credit card issuing bank, you, the payment gateway and the customer of course. For such a chargeback case, you might end up paying even $30/chargeback.

You have to keep your chargebacks at a minimum, if you do not want to loose precious business money. You can do this best if you implement correct sales strategies, and honest product descriptions. A very well setup customer service is also of high importance, as keeping constant contact with your customers gives them trust, and you can avoid unnecessary refund requests or chargebacks this way.

What you will need in order to set up a high risk merchant account

• Settle whether you are going to open one with a bank directly or through an ISO
• You need to provide either with a very well drawn up business plan, which clearly shows the purpose of your business, what are you going to sell, how are you going to market your products/services and how you are going to sell them (presentation website, make use of affiliate marketing, etc.)
• Sales estimates and pricing fact sheets (how much will your product cost)

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Having a website where you can promote your products or services is costly, especially if you do operate only a small business. A reputable SEO company will undertake the job and build a website that respects the latest trends in graphic design and functionality, but until you can afford these costs, a blog can also be the answer that will help you boost the profits. When your blog becomes strong enough to influence people’s opinions, so much that they contact you to ask about your products/services, then it is time to invest into a nicely built website. Your blog and your website can then operate in parallel, with the website being a place of presentation and a marketplace (with a merchant account setup so that you can accept credit cad payments); while your blog is going to be the place where you continue to post news, share ideas, market certain products, etc.

Avoid too many flashy ads/banners

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As a first step, you should not think about writing on your blog in order to monetize it. You should think of creating a nice environment that will help your business grow. Later on, depending on how successful you are, of course you can monetize it and accept ads, but stay away from flashy banners and half page ads written in CAPS. Even if you are offered more money, think of it that this could ruin your credibility and the overall aspect of your place.

• Keep your blog nice and clean
• With a user friendly layout
• With information rich content instead of wall of text fashioned articles

You are working to build something nice for yourself, and you should keep this in mind at all times; don’t let yourself trapped into cheap ad revenues just for the sake of $2/day.

Spread the word with the help of social media

Facebook and Twitter are two platforms that will help you attract even more people to your blog. Setup is free and easy and all you have to do is place fresh news/content/tweets regarding your business. People will be redirected to your blog through these portals, will learn about your interests/business, and will want to know more.

Time to do some real business: Website + Merchant Account = high profits

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When traffic to your blog is constant, and you can also see that people are interested in what you have to offer (through mail enquiries, Facebook comments, etc.) it is time to move on and build your website. This will require a higher investment and greater planning, but all your efforts will eventually pay off. Always work with professionals in the field, and double check that you get what you have paid for.

Make sure that you also contact a reputable company that can help you with setting up your merchant account. A payment gateway is very important to your business’ profile, as you will automatically gain trustworthiness if you are able to accept credit card payments. Even if it is an e-book that you wrote and want to sell it, the merchant account is the simplest and most clear payment system you should implement.

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A large corporation owner does never have to bother with search engine optimization, content writing, advertising, or web marketing because there are huge departments within the corporations that will take care of that. On the other hand, small business owners who have to confront themselves with the bigger corporations need to take care of the marketing aspect themselves. Competition is tough, and for a small business to stay afloat and be able to actually compete with greater businesses, the correct strategies need to be implemented.

Small businesses must have big plans

If you own a shoe store for example, and you have brought your business online by having a presentation website, in order to keep up the competition with Amazon shoe sales, you need to be highly innovative. Always offer something new to your online visitors and customers. You could, for instance make a week plan as follows:

• On Mondays – all women’s shoes 5% off
• On Tuesdays- all men’s shoes 5% off
• On Wednesdays – special accessories at incredible prices (belts, purses, etc.)
• On Thursdays – this is the day when coupons and vouchers can be used (you will send the coupons or discount vouchers to a few of your loyal costumers through email). Advertising that Thursday is Coupon day on your website, will most likely bring you even more loyal customers
• On Fridays – Weekend specials – here you can add categories of shoes for sale with huge discounts (especially those items that usually do not sell too well). Get rid of the old stuff, make room for fresh merchandise. It is also risky to keep a line of collection for too long on your site, because you risk to loose visitors. They come in every week to see what’s new, and if you don’t offer anything new, they will search elsewhere.

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This is only one example on how you can become innovative; it certainly depends on how much you can afford to offer discounts, coupons or other special offers. Most importantly, keep in mind that you need to be versatile, offer something new and something interesting every day. Especially if you are new to the online market, this is the only way you can make your breakthrough.

Build yourself a trustworthy team

In order to be successful and continue climbing that ladder, you need to be surrounded by a few agile minded people. Therefore, make sure that you hire good professionals for the tasks that you cannot handle. For example:

• 1 professional call center agent – who will take care of your customers, and who will be available online from 9 to 5 to handle any problem
• 1 professional content/copy writer – advertising is everything, and most of the times the right words can work wonders.
• Hire the services of an SEO company to build you an excellent presentation website. Selling shoes on blogs is not quite what you can call a small business.

Expand your business with slow steps, and never venture for something big from one day to the other. Make sure you can accept credit card payments on your website, as this is the most trusted payment method. You will need to setup a merchant account, which will let you accept credit cards, and you will be able to keep track very nicely of your profits, because you will receive personalized statements and reports.

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Owning an online business, through which you sell products/services nationally and/or internationally, makes the merchant account a must have. This means you can accept payments made via the credit/debit cards, and you don’t have to worry about anything else. The customer pays, you ship the order, and your business rolls fast and efficient. But in order to know that you contract with a reputable merchant accounts provider, you need to make sure that you understand the role of each fee you pay.

Additionally, you must pay attention to the following:

• Carefully read the fine print and make sure you understand all the specifications there
• Make sure the provider offers you top notch customer service – so that you can contact a team member whenever you need information
• A reputable e-commerce and online payment services provider will also offer you fraud protection (i.e. SSL secured server for your transactions)
• You are able to accept all payment methods (e-wallet, debit cards, credit cards, etc.)

Discount rates, surcharges, hidden fees and more…

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When you search for the perfect merchant account provider, make sure that the company provides you with a very clear description of the fees they charge. When something is not clear, and if you ask and receive no prompt answer, it most likely means that you are paying hidden fees that are unjustifiable.

Knowing what you pay for will always help you keep track of your entire business, and will also allow you to foresee the profits/losses, etc., according to the sales number and traffic to your website.

Fees you can expect to pay with a merchant account

Transaction Fees – this a unique fee charged ever time a transaction occurs. It does not matter whether the transaction is authorized or declined, the fee will be charged. Transactions fees vary depending on whether they are swiped, keyed or wireless (usually more expensive than the other two options)

Address Verification Fee – called AVS, allows you, the merchant to lookup the address of the card holder, thus the service helps you stay away from fraud. The merchant pays somewhere around 5 to 7 cents for this service.

Batch Fee- you are going to be charged this fee, whenever you settle your transactions (forward the money to your account). It will cost you $0.50 the most.

Discount Rates – depending on the percentage you are charged by your provider, this is a fee you will pay after each transaction. If the discount rate is set at 1%, and someone makes an order of $50 in value, you are going to pay a $0.50 discount rate for that transaction.

Account setup fee- is a one-time payable fee, when you open your account with the provider (some selected providers may not even charge you this fee at all).

Early Termination Fee – this is charged by the provider in case you wish to step out of the contract terms sooner than agreed within it. It is similar to an early redemption charged on a typical personal loan (risk management fee for the provider)

These would be the most important fees charged by a merchant account provider, and some extra fees include: the annual fee, customer service fee, monthly minimum fee, or statement fee. All the merchant account fees differ from one provider to the other.

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The fact is that most of the businesses that are using merchant account services are paying their merchant account providers extra money. The merchant account services are mostly overpriced and take more money than the services being utilized by your business. There are certain fees that are customary and are deducted every time a credit card transaction is done. For most of the businesses, these are not a problem at all but such high payments can cause losses to small businesses and can largely reduce the amount of profit they are likely to earn.

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How money is charged through Merchant Account Services?

There are some typical costs associated with merchant accounts and there are some ways that can be used to save some money. All of the major Credit Card issuer companies have got a fee for credit card processing fee which is passed by the merchant account to you for privilege of transaction processing. The fee structure of a business depends on factors based on usage that will be discussed here.

The Fee Structure

The fee structure varies depending on whether payments were made from debit or credit cards. The Credit Card issuing company used by an average customer is another factor that determines the fee structure. The fee structure is different for use of a corporate business credit card or a personal credit card. The fee structure also depends on the type of business and the type of products or services that you provide. Another factor determining fee structure is the average purchase amount and monthly purchase amount of your business.

How can you Save Money?

All the things that have been decided earlier effect the rates being charged to you by your merchant account services in one or the other way. You can save these transaction charges by the method through which fees is passed along to you by your merchant account services provider. Following are some things that may help you to save some money.

Merchant account services pass these costs to the business and get their profit from your statement. A business is charged with a discount fee which is a specific percentage of the per sale charges. Another thing is the minimum transaction fee charged monthly, an annual fee and charge back fee. Other charges include fees for terminals and products and rental fees for terminals along with the statement fees that are charged monthly.

Check the transactions and statements carefully

All of these fees should be checked carefully by a business and it should be made sure that the charges of these services are according to the charges that are described in the contract by the merchant account processing company. The merchant accounts have been charging lowest discount rate but on the other hand they charge high transaction fee which makes the overall process a burden for small businesses. Keeping a close look on statements is another way to avoid high charges. Being careful about your business and the fees being charged to you, you can save a lot of money that your merchant account may be taking from you without any reason.

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Not all Merchant accounts are suitable for every type of business. Every business needs a separate type of merchant account so the merchant account meets the needs of a specific business.

Sometimes, you need two merchant accounts if you are selling products with help of a retail store through mail order catalog. One for the retail store and one for the mail order catalog as a single account won’t be able to do the job for you due to the different type of transactions being processed. Depending on different nature of businesses, there are a number of types of merchant accounts that will be discussed here.

Card Present Merchant Account

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Card present merchant account is the account that processes payment when customer and credit card are present at the terminal. These include wireless, retail and Restaurant Merchant Accounts.

Wireless, Retail and Restaurant Merchant Accounts

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Wireless merchant account uses wireless credit card terminal. This enable accepting credit cards on the go and real-time authorization can be obtained. Like retail merchant accounts, these accounts have got low rates and fees but have got high monthly fees.

A retail merchant account is the merchant account where majority of the transactions are physically processed when credit card and owner are present at the spot. During this case, credit card terminal is connected to land line phone through which authorization is done. These merchant accounts have discount rates and transactions fees and are the most common merchant accounts.

Restaurant merchant account is different from different types of merchant accounts due to the process of tips being charged. These type of account charges the grand total with gratuity and any pre meal spending such as drinks or snacks.

Card Not Present Merchant Account

A “Card Not Present” merchant account is the account through which payments are processed when the customer and the card, both are not present. This type of account is mostly used for mail orders and telephone orders. In this type of merchant account, credit card information is manually entered in to the terminal. Such merchant accounts have high risks and have high processing rates and high fees. Such accounts include payment processing through Internet, Mail Order and Touchtone Telephone.

Internet, Mail Order & Touchtone Telephone Merchant Accounts

Internet merchant account is ideal for online businesses that wish to accept real-time credit card payments. These sales are generated from websites.

A Mail Order merchant account can be used for different businesses where credit card information is manually entered through the keypad of a credit card terminal. These come with the lowest processing rate and fees amongst all the “Card Not Present Merchant Accounts”.

Touchtone telephone merchant account is another merchant account that allows credit card processing with the help of touchtone telephones without any kind of equipment or credit card terminal. This touchtone system is provided by another company. This account has a start-up cost and rates are high as a company is handling merchant account and another is handling the touchtone system.

It is necessary to select the suitable merchant account for your business to get the best out of your business.

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Merchant accounts are an important part of business as they are largely being used for processing of credit card payments through website. Failure in properly researching a merchant account provider can result in problems in the future. It is better to know some things before you are in the middle of some problem.

Account Frozen if you make too much money

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If you are going good in your business and are earning a nice sum of money in short time period, your merchant account provider can freeze your account and this has been experienced by various users. Most of the merchant accounts come with a setup that can not handle large amount of transactions immediately and if the number of customers exceeds what your merchant account can handle, they freeze your account until each customer has received his/her credit card statement through mail. This can cause you big-time trouble as you won’t be able to take any money till the time your account is frozen. As the account is on hold, you have no way of processing credit card payments which means that you are also unable to do any kind of business during that time.

During this time, you would not be able to do any kind of business through your website. This will affect your current earnings and will have a bad impact on your future business as well. When you go to a merchant account provider and tell him that your account has been frozen in the past, he will try to avoid taking you as a customer.

High percentage of fees

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Some of the merchant account providers who cant handle high number of customers do what is described above. Others, who handle heavy amount of customers, charge you a high amount of percentage from each of your sales. Merchant account providers have been found to charge almost 10% of the value of sales as an account fee which results in a great decline in monthly profit earning. Some times this fee percentage is so high that you may suffer from losses instead of earning profits through your products.

They may rob you!

Some of the merchant accounts have also been found to rob you off your money. A number of customers reported that when they had earned a lot of money during short time not only their accounts were frozen but also the provider took away a lot of money from their bank accounts. After this happened, their current bank refused from letting them use their services and terminated their account handing them over all the available money. These problems sometimes result in denial by all the reputable banks to allow you from maintaining an account over there. Most of the banks refuse to offer you services as they don’t want to face these merchant account troubles.

How to make merchant account work for you?

To avoid the problems described here, it is better to do some research on your own part and to get feedback from existing customers. Find a trustworthy provider that does not limit amount of money that you can accept each month.

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Every small business needs some form of payment processing and it is necessary to understand how to select merchant services as it has a great impact on sales revenue and profit. Following are six essential questions for selecting merchant services.

What are Merchant Services and who offers them?

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Merchant services are a method to enable credit card payments from your customers to your business. This account is connected to credit card processer to route payments to your bank account. These services are provided by specialized merchant service providers or independent sales organizations that offer payment processing. Merchant account services are also offered by different financial institutions.

Which company suits small business needs?

It is necessary to check which company suits your needs and this depends on the situation of your business. Banks turn-down home based business owners on the basis that their business isn’t well established. In such cases merchant service providers are flexible options and they are credit card processor who offers services at low rates.

Merchant account is not the only source of accepting as credit cards can be accepted by contracting with companies to process payments on your behalf. Credit card processors are a better option as they charge a small percentage of payment that is received as compared to heavy amount charged by other companies. Merchant account services are a better option to trade online.

Requirements of payment processing

Payment processing can be done if you have the following things available:

1. The first requirement is to have a Secure Server with Certificate to prevent data interception using SSL encryption so that no unauthorized decoding can be done.
2. The second thing is that for customers to safely enter personal and banking information, the order form should be on a secure server.
3. You should have a safe gateway as it is a tunnel that is used for authorization, processing and management of the merchant services.
4. Shopping cart should also be available on your online business. This is software that calculates all the purchases automatically for you. Before installing, make sure that the software is compatible with the gateway.
5. All the things that are mentioned above can be obtained by you but until you have a merchant account, real-time processing cannot take place. Merchant account provides access to processor and makes it able to authorize, capture and settle the transactions that are made.

Alternatives to accept Credit Card payments

Merchant account services are a good way to process online payments. If you don’t want to get in to merchant account services for payments, you can outsource them to a third party who collects customer data and rest of the work is done to process payments for your business.

Apart from this outsourcing method, credit card payments can be accepted online with help of deferred payment processing. In this method, customer inputs data which is received by you manually without any gateway. This method has the advantage that each order can be checked and corrected. Such solution is not ideal as it can be time consuming for numerous payments.

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A merchant account is doubtlessly an important tool for businesses of today. There are even businesses that do not have sufficient resources to open up a merchant account for their business even when they now that they can’t afford not to have one for their business. Businesses of all sizes help in making the most out of the business trends where people prefer cashless business. You cannot miss the chance to lose the customers who are using their credit cards.

There are a huge number of options available for the companies that need merchant accounts. A quality merchant account service is something that you need more than anything else. The market these days is very competitive and one needs to make sure that they get the most appropriate services.

Searching for a low priced quality solution

Merchant account provider fee schedules are quite complicated and not so easy to understand. You ought to understand the problems that you might encounter in case you do not have a merchant account. According to the financial analysts, merchant accounts are a must to have if you wish to make the maximum profit.

Merchant account jargon is not just confined to the hidden fees and structures. There are even some elements of the merchant account that are pretty hard to manage. The calculation of these details is pretty hard to do and one should rather focus on simple accounts that have all transparent accounting principles just to make it simple and plain.

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Fees that confuse buyers

There are a lot of fee structures that might confuse the buyer at any instance:

• Credit evaluation start-up fees
• Cost of per transaction fees
• Maintenance charges
• Termination Fees
• Miscellaneous charges

The best way to get these matters sorted out is to get all the details related to fees and charges printed on the agreement that you are signing for your merchant account provider.

Low Cost Merchant Account

Everyone especially the newly settled businessmen are looking for low priced options. One perfect way of doing this is through giving your merchant account provider a percentage of the sales you make through the channel. There are even merchant accounts that ask for a high price as the amount of sales through the merchant account increases. The best way to get this done is setting up a percentage profit for the merchant account provider. This can save you money as well as the merchant account will not be reluctant setting up your account for reasonable price.

Special Offers by Merchant Account providers

There are certain special offers that have been set up by merchant account provider on credit card payment services. There are a number of solutions that have been posed by the companies to cut short the price. One of them is using touch tone phones in order to save the cost that you might pay to call for the credit card payment.

A few minor details sorted out can set up an affordable solution for you so that you can move on with the operation.

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There are a lot of terms that are used when it comes to merchant accounts and the jargon associated with them. The following article tends to describe all the merchant account related jargon so you might not be confused with it the next time you talk to a dealer about setting up one account.

Settlement Time

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The settlement time is defined as the time it takes for the money to be processed and credited into you business card account from a certain credit card. There are different service providers giving you different settlement time that range from an instance to a whole lot of three months depending on the nature of your business. Poor merchant account producers can take up the same instance for the settlement. Most of them process the details in no more then 2-3 days on an average.

Discount rate

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Discount rate is the specific percentage against each transaction that is taken up by the merchant account provider for any payment that takes place through third party processer. This might cause you 2-10% on the whole. You must look for the lowest discount rate possible to make the most. These fees are set open to you so they are not considered as hidden charges.

Monthly recurring fees

Your account needs technical assistance and support from the merchant account provider. The monthly fees is something that you can rely upon as they need to make something out of the services that you are going to get against your account. There are even processors that don’t charge for a monthly fee yet they have higher discount rate fees. Consider the discount rates and monthly fees to a greater extent understanding each bit of how this works. You will have to pay for the fee even if you don’t use any of the services.

Reserve Funds

Reserve funds are the money that has been kept back by your merchant account provider in order to stay insured. This reserve fund is used to make the chargeback in case you face more returns so that the merchant account processor needs not to pay anything from their pocket. Though you will not need this if you are a sound businessman but this is still safe. Make sure that you decide the mode of payment for reserve funds. You can set up installments for reserve funds.

Processing limit

Processing limit is the amount of money that pay against your monthly turnover and it might affect the ticket price that you charge as well as the monthly turnover your business is getting. These limits do not imply for smaller business that have items that are not that expensive. If you are dealing with something expensive enough, you must consider these details as important.

Chargeback fees

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The most unpleasant fee but the one that does make a lot of sense is the chargeback fee. If you are doing business over the internet, you might also be required to pay back the money if the services or the products are not the way as promised. You should make all the possible moves to reduce the chargeback but the fee is a must.

Try considering all these details before you make the right move about setting up a merchant account service online and you can save yourself a lot of money.

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