Different Types of Merchant Accounts - So Which Type Best Fits Your Business?

July 5, 2010 - PRLog -- Merchant accounts are becoming more and more technologically advanced as time progresses. The way that we now accept money has taken a complete u-turn from the days of exchanging gold coins for certain items or services. Even your hard-earned cash is taking a back seat to plastic money popularly known as credit cards.

If you are in a developed country, your credit report can either make or break your financial future. In other words, more people and businesses are dependent on plastic money instead of hard cash. If you are a business owner, you will not make it without the services of a payment processing company, or what's called a "merchant account". Depending on the type of your business, a merchant account will be handy in accepting your customer’s credit card payment, either electronically or physically. Without a merchant account, your business will be handicapped in a technologically advanced generation. We will discuss different types of merchant accounts and how they might be the right kind for your particular business.

A merchant account is basically an account with a bank or a payment processing company that allows your business to accept credit cards through different platforms (electronic checks or credit cards) of transaction. Whether you have an online business (e-commerce), a physical store, telephone-based business etc, and a merchant account will enable your business to accept payment from a customer who might happen to be on the other side of the world. With the revolution of Globalization, it is imminent that your business is equipped with a service that will accept payments from across the world. There are four different types of merchant accounts that function differently based on the category of business. Let us further elaborate on them...

1. Traditional Account with equipment - This is for the retail businesses (grocery, departmental stores etc) doing a large volume of sales per day. This account features low discount rates and higher monthly/program fees. For example, you've undoubtedly seen a swipe card machine for credit card payment at a local grocery store.


2. MOTO (Mail or Telephone order) - This enables phone based or direct mail orders processing for customers who can buy your product or service from the comfort of their home. It usually has a higher discount rate but with lower fees and there is no need for equipment.


3. Internet based merchant account (Ecommerce/Website order processing) - This merchant account is in high demand these days with the number of websites doing business is on the rise. The retailers or vendors can use this merchant account for selling their products on the Internet. This merchant account has a medium discount rate and a medium to high monthly fees.


4. Mobile or Wireless merchant account - This merchant is specifically designed for small businesses, solo professionals, and mobile services (including lawyers, landscapers, contractors, consultants, repair tradesmen, etc), who are constantly on the move and require a payment to processed on the spot. It has higher discount rates and a low monthly fee.

A particular business can have more than one type of merchant account. If you own a large business with a multitude of service platforms, all the above-mentioned merchant accounts can be of great service for a customer friendly service to your customers. The biggest differences between these merchant accounts are the monthly fees and the discount rates. Depending on the nature of your business, you will have different guidelines for the credit card transactions. The fees and discount rates are applicable as per the business model because the credit card risk department will evaluate the payment risks associated with the type of transaction.

Traditional Swipe account also known as “retail merchant account” has the least amount of restrictions and a minimum transaction fees. Retail accounts are usually a physical storeowner with the transaction-taking place with the presence of a credit card. This physical transaction minimizes the risk of theft compared to other virtual accounts. MOTO merchant accounts possess a higher amount of risk as the transactions are taking place in a virtual manner. In other words, the person using the credit card is not visible to confirm the ownership of the credit card. Hence, MOTO merchant accounts have a higher transaction fees compared to the retail account. Similar to MOTO merchant account, an Internet based merchant account is also exposed to a lot of risk in terms of credit card thefts and frauds. The “Hackers” on the Internet have already caused a lot of headache for companies using this type of merchant account. It does not take much for these hackers to use a credit card that actually belongs to someone else. As a result, Internet based merchant account has a higher rate of transaction fees.

It is really not that difficult to make use of these merchant account services. Try to spend some time on researching different companies to best fulfill your business needs. Remember, to carefully read the terms and conditions of the merchant account provider before registering an account.

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