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.

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!

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.