Choosing a Merchant Account that’s Right for Your Company

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If you’ve decided to take the steps necessary to open a merchant account, it’s a good bet that you realize all of the advantages that can be experienced when a business begins to accept credit cards as a form of payment for goods and services. But what you may not realize is that there are a wide variety of merchant accounts that are designed specifically to suit the unique needs of different types of businesses, and different methods of payment.

Depending upon the type of business you’re in, as well as the way in which you will be accepting credit card payments, the type of account you need can vary. The following brief guideline will review some of the options available to businesses today who decide the time is right to open a merchant account, and reap the rewards offered by credit card customers.

Retail merchant accounts are the most common type of merchant account in use today. Used by stores and businesses operating traditional storefront operations, these accounts typically rely on a credit card terminal to obtain information regarding the credit card account being used for the purchase. The most familiar type of terminal is use today is the swipe terminal, which offers a slot specially designed to “read” the information that is encrypted on each individual credit card. The terminal transmits the encrypted information directly to the credit card issuer, which can identify the account being used and determine if the card can be used for the transaction, or if the transaction must be denied. Because purchasers must physically present the card to make a purchase, these accounts are associated with the lowest risk of credit card fraud, and hence are charged the lowest fees. These accounts also have the lowest restrictions imposed upon them. Because account information is transmitted via telephone, a retail account terminal requires a dedicated phone line in order to complete transactions successfully.

Mail order and telephone (MOTO) merchant accounts are specifically designed for these two unique types of businesses, and like the retail account, credit card transactions accepted through MOTO transactions may rely on a terminal to process the card information. While some small-scale mail order and telephone businesses use physical terminals like those used in a retail establishment (only with a keypad instead of a swipe slot), most rely on a so-called virtual terminal to process orders. These virtual terminals are actually computer programs that accept credit card information and then transmit it to the card issuer, much like the swipe terminal. In these virtual terminals, a human user must enter the information by hand and wait for a transaction to be accepted or declined by the card issuer before completing the transaction.

Internet merchant accounts are one of the fastest growing segments of the merchant account industry, with thousands of new businesses appearing online each year, all vying for their share of credit card customers. Offering high levels of flexibility, businesses operating online use their merchant accounts to accept payments from any viable Internet connection. Unlike the retail and MOTO accounts that use actual or virtual credit card terminals to process credit card transactions, the online account relies on a gateway provider to gather and transmit information to the card issuer, and then receive a code that “tells” the online merchant to accept or decline the payment, based on the account information. In essence, a gateway provider acts like a swipe or virtual terminal, but is completely automated, and no human interaction is required to process the transactions.

Wireless accounts are the second most rapidly growing segment of the merchant account industry, and are designed to accept credit card payments from mobie devices, such as cell phones. These accounts are especially popular with tradesmen and consultants, as well as salesmen, who are on the road for a large portion of their business.Because MOTO, Internet, and wireless transactions do not require the purchase to be made in person, these accounts are associated with higher levels of fraud than retail accounts, and so are charged higher fees.

No matter which type of account you have, most merchant account providers also use address verification systems, or AVS, to reduce fraud by ensuring the address given in order matches the address associated with the card. Retail merchant accounts may not have this feature enabled, since cardholder addresses typically are not required to place an order in person.

Because many businesses rely on more than one way to accept credit card payments, many merchant providers offer “bundled” services, featuring more than one method of accepting credit card payments. This service has become especially popular with businesses that have retail establishments as well as online stores.

The number of consumers using credit cards is growing, and merchant account providers have expanded their services to meet the need. If you aren’t yet accepting credit cards at your business, contact a merchant services provider today to find out about options that are right for you.

Karen Zabel is a freelance writer who writes about Credit Card .