First off, a merchant account is an account with a bank that allows you to accept credit card payments. This means you can tell your customers to pay either in cash or use that little plastic card in their wallets. There are two kinds of merchant accounts for the two different kinds of transactions:

Card present transactions

Card present transactions means at the point of sale(POS), the credit card can be swiped on a physical terminal. Think Borders bookstore along El Paseo.

Card not present transactions

Card not present transactions means a credit card cannot be physically seen as well as swiped. Mail Order/Telephone(MOTO) merchants & Internet merchants fall under this category. There is no physical storefront or POS. Applicants of a free merchant account usually fall under Card not present transactions.

A free merchant account is obtained through a third party processor. The third party processor allows other merchants to share their own merchant account. Merchants who avail of a free merchant account are usually rejected first by banks or brokers, or are either start up businesses who don’t have enough money to get their own merchant account yet.

Requirements of a free merchant account

Applications can be quick, or drag on for days depending on your responsiveness to the requirements (& how quick your agent can arrange for a merchant account). Here are some items needed to apply for a free merchant account.

Accomplished Merchant Application & Agreement

A business checking account

Articles of Incorporation or Incorporation Documents

Valid Identification Papers ( e.g. Passport, Drivers License)

Business License

Voided Checks

Bank Letter with Beneficiary Name

Web site URL

Statement of your return policy

Fees of a free merchant account

Like banks & brokers, free merchant account providers charge merchant fees.

Discount rate (around 2-4% of transactions)

Transaction fees

Monthly processing fees

Other fees you might incur include one time application fee, AVS(address verification service fee), statement fees, return fees, reserve fees, & charge back fees.

Before you sign up, keep these things in mind

Make sure you’re getting a free merchant account from a reliable company. Scour the Internet for any good or bad reviews for that provider.
Review your options. If it means going through several providers & reading each & every offer sheet, then so be it. Look at the charges & always read the fine print.
Don’t give your go signal (in fact, your signature) if they can’t answer your questions. If they can’t answer your questions now, how can you expect them to answer your questions down the road?

Just like any decision you have to make in life, reviewing your options, doing your homework, & carefully reading the offer sheet of your free merchant account provider can very well be worth all the time spent making that decision.

However for some merchants with start up businesses, getting their own merchant account proves difficult. A mom and pop business applying for a merchant account through a bank can get rejected for the following reasons:

1.Nature of the business is too risky

2.Too early in the business to apply for a merchant account

3.Processing volume is too low

There are a lot of reasons to get rejected by banks or brokers. However, hope isn’t lost as there are other ways to get a merchant account. Get a free merchant account.

Free merchant account providers flood the Internet. They offer so many freebies, you can just imagine where they get their profit. However, contrary to popular belief, a free merchant account isn’t free.

No it’s not. It never was, it never will be.

Can you imagine anyone having a business of processing credit card transactions not making money?

That’s called charity, and what they do is far from not gaining any profit.

This is where the problem starts, the misconception people have on free merchant accounts.

Misconception #1: Everything’s for free with these merchant accounts

Sorry to say but they also have overhead expenses, employee salaries, and other related expenses. There is no business in the world that isn’t out to make money. For free merchant account providers, although they do give out freebies, they still get a fee from the transactions they process for your business. They do provide free setup, free terminals, and free software to invite start up businesses to sign up with them.

Misconception #2: Free terminals are guaranteed new

Indeed, free merchant account providers offer free terminals – however, not all terminals are created equal. Some terminals process credit cards only, others are appropriate for wireless merchants, while others process echeck payments. Some providers give out terminals that aren’t as appropriate as you’d like for your business. Other free merchant account providers dupe merchants into thinking it’s all new – when in fact, their terminals are refurbished or completely out of date. However, there are always 2 sides to a coin. There are still a lot of free merchant account providers who give out top of the line equipment to their subscribers.

Misconception #3 Free merchant account is the secret to ecommerce success

People believe there’s always a magic pill to success. Wake up bucko, there isn’t. There’s no such thing as instant success, more so in business. Okay, admittedly there are some who are LUCKY in business, but let’s make this clear – they worked hard for it. Although a free merchant account can help you process credit card payments, it’s not enough to have it. You have to market your product or service successfully, and make sure your goods are in demand. A business demands a lot, and a free merchant account is just one of them.

A free merchant account is indeed a helpful tool in creating the empire you want in the Internet marketplace, however, one should be wary of scammers who prey on innocent merchants who do search for information, not just the right one. Getting the right information can reduce the misconception, and prepare you for what to expect from the services of a free merchant account provider.