Whether you're a traditional brick-and-mortar business or an Internet start-up, it's unlikely that you're able to do business without accepting credit and debit cards for payment. And if you DO limit yourself to cash or cheques, you’re leaving money on the table!

With restrictions on how much credit card companies are allowed to charge for their services, and an increasing amount of competition entering the marketplace, we are seeing plastic used to pay for more and more all the time!

In fact, while credit cards were once the Preserve of the Big Game Hunters, being used primarily for larger purchases, today they are becoming the standard method of payment, regardless of item ticket price.

People are just as likely to pull out their credit card to pay for a fast food lunch as they are to use it to pay for a new DVD player. And as security increases and technology improves, this trend is growing across the Internet also!

So What is a Merchant Account?

A Merchant Account is an account that is created so a business or individual can accept credit cards, debit cards, gift cards and other forms of electronic payment; also widely known as payment processing.

Essentially your Merchant Account is your connection to your bank and facilitates the transferring of funds from sales into your bank account.

You may also hear the term Payment Gateway. A Gateway is the software interface between a web-based shopping cart (or order form) and the Merchant Account. A Payment Gateway is an e-commerce service that authorizes payments for e-businesses and online retailers. It is the equivalent of a physical POS (Point-of-sale) terminal you see located in most retail outlets.

Payment Gateway’s encrypt sensitive information, such as credit card numbers, to ensure that information passes securely between the customer and the merchant. This prevents opportunity for fraud and adds additional security to the transaction process.

Gateways communicate with a variety of entities, including:

• The Customer
• The Merchant (through their website)
• Credit Card Companies (to verify entered information)
• Merchant Accounts (which relay the Gateways information to the merchants bank account)

Still confused? Let’s look at the actual flow of a Sale on your website:

1. Customer decides to buy and enters their information into your website’s order form.
2. Payment Gateway takes the necessary information and verifies that:
   • Enough funds are available
   • The address entered into the order form matches the address the credit card company has on file for that credit card
3. Once the information has been verified, the Payment Gateway notifies the Merchant Account that everything is okay.
4. Merchant Account then withdraws the appropriate funds from the credit card and deposits it into the Merchants Bank Account.
5. Customer receives an Approved Message!

The good news is that this process is as secure as using your credit card in a traditional off-line store and even though it sounds like a lot is going on behind the scenes, typically all five steps take less than 3 seconds!

What Does all This Cost?

In exchange for the ability to process transactions online (or off) you should expect a few different fees. Remember, this is not a standardized process and you will see variation from one Merchant Account to the next.

To get started you will usually have to pay a setup fee, although this is sometimes waived. You will commonly see setup fees range from free to $299.

Regardless of what you pay for your setup, you will also be expected to pay a monthly maintenance fee which generally runs around $10-$15.

On top of your monthly fees, you will also encounter two ‘Per Transaction’ fees. The first is a flat rate charge that is applied to each transaction you process. This fee will typically be around 25 cents per transaction and is garnished by the credit card companies (Visa, MasterCard, etc).

The second transaction fee you should expect is called a Discount Rate. The Discount Rate is a percentage of the dollar amount of each transaction.

Discount Rates can vary based on the business type, the method the transaction is taken (Swiped, Keyed, Internet), and other qualifying factors. Typically, the Discount Rate you should expect for an Online Merchant Account is around 2.2%

So What’s The Catch?

There are a lot of different Merchant Accounts online and you should spend a little time researching the solution that is most appropriate for you. And while having a Merchant Account makes it easy to conduct business online, getting a Merchant Account is not always easy!

It can sometimes be difficult for a new business to obtain a Merchant Account because you will be expected to submit detailed company and financial information during the application process.

Some providers will even expect you to own your own domain, have a functioning website and in some cases already have integrated a working shopping cart service! Essentially, a Merchant Account provider wants to see a valid business before granting the power to accept credit cards online.

Don’t leave applying for a Merchant Account to the last minute; it is never an instant process and in extreme cases it can take more than a week to get your business approved, although two or three business days is typical!

One more thing to keep in mind is, occasionally, Merchant Account Providers will require you to set aside a sum of money for a Reserve. This amount is to protect the Merchant Account against fraudulent orders and would be based on the risk assessment conducted on your business.

Where Do I Sign Up?

Having a Merchant Accounts is absolutely vital for your business if you want to succeed online. It is for this reason that companies like 1Shoppingcart.com offer a Quick-Signup and Low-Fee Merchant Account service!

Start accepting credit cards on your website in less than 48 hours! Click here to sign up for your very own Merchant Account right now!