Once you have completed your web site the next step is to apply for a Merchant Account, also known as Internet Merchant Account or Ecommerce Account, which allows you to accept card payments. This is extremely important as consumers are used to purchasing online using either a debit or credit card and without this facility you are restricting the ways in which customers can purchase goods or services from your site.

When setting up a merchant account it is a very good idea to shop around and the rule of thumb is to not take the first option you find (unless of course it’s outstanding!). When approaching banks make sure that they provide you with all the information you require. Ideally you should be prepared with questions to find out the following:-

The charge each month for issuing statements on all your transactions The cost for processing your application (yes unfortunately there is one) The kind of discount rate they are willing to give. This is normally a percentage deducted from each sale The transaction rate which is normally added to the discount rate and is a flat rate on each transaction The monthly minimum charge which is made regardless of the level of sales each month The cost of chargeback’s which is the fee incurred per fraudulent transaction. Any other additional charges of which you should be made aware

In addition it is important you make sure your chosen bank has the capacity to serve you. Some banks may give the impression that they can provide everything you need creating a false sense of comfort since some smaller local banks tend to outsource their customers merchant accounts to third parties for a commission. You can save time and money by going directly to a national high street bank that can provide all the necessary services within its corporate group structure or indeed contact Seymour Direct who probably can offer the lowest running costs for a merchant account in the UK.

If you fail in your attempt at setting up an internet merchant account or even if you do not want the hassle of setting one up then there is no need to worry. You can use a third party processing service such as PayPal, 2Checkout, or ClickBank. These payment processes normally charge a percentage fee for each online sale that is made plus charge a transaction fee for receiving money (i.e. a percentage of the amount sent plus an additional fixed amount). The benefits of using these services are that they are easier to set up, offer fast payments but can work out very expensive if your sales from your web site increase. However they can provide a means to an end whilst tweaking your site and are an ideal option for smaller businesses.

For larger businesses it is recommended that you obtain an internet merchant account. It offers better flexibility for your customers allowing them a variety of card payment options whilst at the same time making your site more professional and trustworthy whilst keeping your costs per sale lower.

It can be a long and even expensive process preparing to sell online not to mention the ongoing costs when you are finally up and running. However your exposure on the internet can significantly boost your sales and thus increase your bottom line.

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.

Many online businesses look for a merchant account offshore for various reasons, ex. have large volume requirements, fast business growth, cannot be approved at a standard processing bank due to new regulations poor credit, or the type of products or service that they sell. By processing through an offshore processing bank, your business may qualify for no monthly or yearly volume limits, and very lenient product type requirements, so your business will never be hindered by the strict guidelines of a domestic processing bank. Many businesses such as software, website hosting and electronics fall into the high risk category and must use an offshore merchant account. Some of the largest and most respected businesses in the world use offshore processors due to their growth and product types.

Increased need for Offshore Merchant Accounts

The growing need for offshore merchant accounts continues to increase. Due to US laws and regulation changes in the Untied States, banks and processors have tightened their due diligence and acceptance to merchants processing payments online. If your business is growing and due to increased sales and your U.S. acquiring bank is threatening to terminate your merchant account, then you will need to start seeking and offshore merchant account? Offshore merchant accounts have become a necessary aspect of the ecommerce world.

What to expect with an Offshore Merchant Account

Accept MasterCard, Visa, American Express, Discover, Switch, Solo and JCB

Multi-Currency credit card processing

Gateway – to process your electronic payments, normally offered free by merchant service providers.

Shopping Cart – Offshore merchant accounts are compatible with most leading shopping cart vendors.

High approval rates, even if you do not have perfect credit you there should not be an issue with you obtaining a merchant account.

Virtual Terminal – To enter MOTO orders

Recurring billing – ability to auto bill recurring payments.

Check accept – ability to accept checks online though your offshore provider,

Online View – Ability to access your merchant account activity online 24 hours per day, 7 days a week.

Online Commerce has become an important sales source for businesses throughout the world. The internet allows an unlimited amount of customers, which makes doing business on the internet very appealing. An offshore merchant account is what you will need to grow your business. With an offshore merchant account you will not have to worry about jeopardizing your merchant account for growing your business!

One important factor that determines the selection of a merchant service provider is the cost associated with a merchant account. These costs tend to differ from provider to provider and are usually high. Hence, many online business firms tend to be apprehensive about these accounts. In order to increase their business, merchant service providers or banks are always coming up with innovative business strategies. One such strategy is offering free merchant accounts. In this context, it is important to understand the differences between a paid merchant account and a free merchant.

A free merchant account is one where the merchant service provider doesn’t collect any membership charges from the merchant nor charge any setup fees. This means that the merchant need not pay anything in order to register with the merchant provider and receives the necessary payment gateway information and setup guide free of cost. Many merchants tend to have an impression that free merchant accounts are much better than a paid one. However, these accounts have their own set of advantages and disadvantages. It is important to know about these before opting for a free account or a paid account.

In this world, nothing comes for free. If one is underpaying for something that needs to be compensated by overpaying for something else. The same is happening with free accounts. The only advantage of a free account is that the merchant gets the account without paying a single penny. However, the disadvantages are many. These include higher processing rates and chargeback rates that can cost much more than the costs incurred on a paid account. These high rates are charged by service providers so as to compensate the money lost due to free registration process.

One can easily determine the difference in charges by doing a simple comparison. For example, assume that the average costs on a free account levied by a merchant service provider for every online transaction is equal to $1.00 + 5% of the entire transaction amount. This means that if a customer has purchased an item worth $100, then the same is paid by the customer. However, the merchant doesn’t receive the entire amount. The service provider deducts the costs and deposits the remaining amount in the merchant’s account. Hence, for every $100 transaction, the merchant has to lose $6 towards charges. As a result, he/she will get only $94 (5% of transaction amount=$5.00 + $1.00=$6.00). In reality, service providers have been known to even charge rates as high as $14 on free accounts. In contrast, charges on a commercial or paid account are much less. As a result, greater savings and higher profits seem to be possible through a paid account.

Another major disadvantage of a free account is lack of technical and customer service from the service provider. As a result, merchants have to compromise on the security and stability of the payment gateway and the transaction.

On the contrary, a paid account has all the advantages including lower processing rates and providing secured transaction gateways to the customers. Also, banks tend to offer rewards on transactions where paid accounts are being used. Free accounts usually don’t have any such offers.

Hence, one should choose an online merchant account depending on the requirements and needs of the business firm.

It’s a fact. Companies who accept credit card payments for goods and services tend to generate higher revenues than those who only accept cash. According to industry statistics, the average credit card sale is $40 versus just $9 for the average cash sale.* If that isn’t enticement enough, consider the disadvantage you may face if competitors offer credit card payment options and you do not.

“These days, the credit card payment option is a must, whether you have a physical retail outlet, take telephone orders or sell products over the Internet,” says Diann Joblonski, a relationship manager, at Michigan Bankard Services, a leading merchant card processor serving over 30,000 businesses nationwide. Besides the potential revenue boost, credit cards may well be a cheaper alternative to cash and checks. In a case study prepared by Coopers & Lybrand, credit card processing costs average 2.7% of any transaction, checks 4.0% and cash 4.8%.** These figures make sense when you consider how many times paper money and coins must be counted and recounted by different individuals. While each business would vary in that respect, cash and checks still require more handling than plastic alternatives.

Establishing A Merchant Account

To offer the credit card payment option, you need to set up a merchant account-a bank account established by your company to receive the proceeds of credit card purchases. Typically, along with the account, you will also need to lease equipment and software to facilitate the transactions and ensure payments flow to your operating account. The process is slightly more complicated if you wish to accept credit cards online. In particular, you will need to sign-up with a payment gateway such as CyberCash or VirtualNet. These services allow for real-time credit card authorization for online transactions. It is essential that the payment gateway you choose is compatible with your software and financial institution so transactions flow properly.

Any number of financial institutions offer merchant accounts, but you should look for a provider who has demonstrated expertise in working specifically with small and growing businesses. These organizations can often structure accounts faster and at better rates than those who cater to larger companies. As you shop around, you should also look for institutions that work with customers to combat fraud and reduce chargebacks. And if you are conducting online transactions, you will want to work with a provider who has expertise in setting up and processing Internet merchant accounts.

The next step is the application process which can take anywhere from 48 hours to two weeks or more. Your chances of being approved relate to the nature of your business and the credit rating of your business and/or its principal owner(s). While existing retail establishments are the easiest to be approved, mail order and Internet businesses, with their higher rates of chargebacks and fraud, pose more of a challenge. “We look at the merchant, the nature of the business or the product, the refund policy, and the business financials or a sole proprietor’s own credit history,” states Joblonski. The cost of a merchant account will vary based on the perceived risk a business poses.

A Word About Costs

As you shop for a merchant account provider, you should be mindful of the costs involved with establishing and processing a merchant account. “You can expect to pay between $190 to $300 in start-up costs which includes the application, setup and equipment and rental lease deposits,” notes Joblonski. Processing fees can range from around 2.0% of annual sales volume for a retail establishment to 2.75% of annual sales volume for online transactions. Additional fees may also apply. Ask your merchant account provider for a complete list of fees so there are no surprises.

Putting It All Together

Congratulations, you can now accept credit card transactions. But are you maximizing the benefits of those proceeds? Maybe not, if those funds are being routed to a bank account that pays no interest on that money. Worse yet, you may have to wait a full month to get details on those credit card transactions, and have to pay for the privilege.

Is there a better way? Yes. Some financial institutions specialize in providing value-added merchant account services. For example, OneCore, a leading provider of online financial services for small business, pays money market rates on credit card proceeds. You can also view batch transactions (and transaction details) online by the next business day, free of charge.