Business
merchant account
is not the same as a standard personal or
business checking or savings account. It
is an underwriting process by a merchant
bank (also called acquiring bank) and this
facility allows an online merchant to accept
credit card payments through the Web site
or "Web store".
This merchant bank account
is a place where the merchant account provider
holds (up to 48 hours) the funds associated
to your sales from your online store while
settlement and capture is completed and
then the funds in this holding place is
transferred to your business checking or
savings bank account.
A
bank that is authorized to issue merchant
bank accounts (directly or through its affiliates)
to businesses and companies is called an
Acquiring bank and it has been
certified by Visa and MasterCard associations
for online transaction rather than the usual
face-to-face transactions.
An
Acquiring bank can provide the merchant
with all of the services related to his/her
merchant account needs, including the Discover
and American
Express (although a separate application
process) which can be added to the merchant
processing for Visa and Mastercard.
Once
the merchant account is setup and "live"
on a payment processing system, merchants
can accept credit cards from their customers.
This applies to both brick-and-mortar businesses
as well as Internet-based businesses.
Business
merchant accounts started around
1995 and and is treated by banking institutions
similar to a MOTO merchant account. MOTO
stands for Mail-Order-Telephone-Order or
card-not-present.
The processing
of credit cards online is slightly different
than processing for restaurants, retail
shops, hotels, car rental, etc. There is
usually a higher associated risk for the
bank and hence their pricing is higher.
Application Fees
or Setup Fees
Although many are waiving
these fees, some internet merchant account
providers still require an up front application
fee or setup fee. In almost all cases, this
is really a sales fee that is paid to the
salesperson or the sales organization and
any attempt to persuade a customer that
this fee is really an application processing
fee is futile. Underwriting departments
that process your application do not charge
a fee and it is part of the overall service
they provide for merchant accounts. Don't
let anyone tell you that this fee is necessary.
However, most merchant account providers
waive this fee.
Monthly Minimum
Fee
The truth about this is
that you will be paying at least $25 per
month (on top of the monthly statement fee)
for your account and this is in case you
do not process enough transactions that
would bring your total monthly fees about
$25. Most all internet merchant providers
require a monthly minimum fee since they
feel that they need to cover their costs
even if you don't use your merchant account
as much each month. To me this is logical
and from my years of experience in this
industry, I have never seen any merchant
provider waive this fee yet (unless they
were playing tricks and get you somewhere
else).
Statement Fee (also
called, Customer Service Fee, Online Support
Fee, etc.)
I have a different name
for this fee. I call it NONSENE fee. Merchant
companies are not content with making $25
minimum per month, so they want to come
up with another trick to charge you more
money. $10 for printed statements, $8 for
online transaction reporting, and $15 customer
support fee, etc. all all nonsense and silly.
You should suggest to the merchant company
that you do not wish to pay for any of this.
Discount Rate
Visa and Master card merchant
account discount rates should be TOTAL of
2.1%. IF you are getting anything other
than this, YOU ARE PAYING TOO MUCH. American
Express and Discover merchant accounts charge
3.25% and 2.6% respectively. This discount
rate gets deducted from your sales ticket
(e.g. if you sell an item for $100 to a
Visa cardholder, your sales proceed will
be $97.90 before other fees are deducted.
MY
ADVICE: For years
I have seen new businesses and companies
get Visa merchant accounts and Master Card
merchant account. Then they also wanted
to add American Express and Discover merchant
accounts to get more customers. However,
this is costly and you absolutely do not
need to do so (in 99% of cases). Anyone
who has American Express and Discover, already
has Visa and Mastercard. Why make your life
more complicated, have more merchant accounts
to manage, and on top of all, pay more in
discount fees and other fees ($10 per American
Express / Discover merchant accounts) when
you really get little or no return for it?
Transaction Fee
This is a fixed fee between
$0.10 and $0.30. The transaction fee is
a fixed fee and does not vary like the discount
fee. You pay 10 cents whether your sales
ticket is $10 or $10,000. This is yet another
fee that the merchant bank makes on top
of all the other fees they charge.
Payment Gateway
Transaction Fee
Some gateways also have
transaction fees. Please remember this is
paid to the payment gateway company or its
processor and not to the merchant account
provider. They are two separate fees.
Termination Fee
I dislike this the most.
Some merchant account providers charge you
anywhere between $200-$400 if in case you
want to cancel or terminate the account
within the first 12-months or the first
3-years. The worst companies I have seen
doing this are Card Services International
(or CS International) and some of their
banking affiliates. There is no need for
this fee. It is unfair and not necessary,
in my opinion.
Chargeback Fees
If one of your customer
requests a refund from their credit card
issuing company without getting a refund
or credit from you directly, your internet
merchant provider will charge you a separate
fee (usually between $10 - $20) for charge
back in addition to deducting the sale amount
from your sales receipts.
Read your merchant account
application and contract carefully as other
special fees may also apply. I have enclosed
a sample merchant
account application for your review
- please remember this just a sample application
only and not an actual application form.
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(last 30 days) 
