Merchant Account

A merchant account is a contract under which a bank extends a line of credit to a merchant, who wishes to accept payment card transactions of a particular card association brand.

Without such a contract, an organization cannot directly accept payments by any of the major credit card brands.

Credit cards allow customers to use credit or debit cards instead of checks or cash to complete a sale.

Companies pay third party redemption services a transaction fee (normally a percentage of the transaction) for processing and remitting back this payment.

As customers are less likely to carry cash, accepting credit cards for payment becomes a business necessity to facilitate greater sales volume.

One key area to watch for merchants is the redemption rate. This rate describes the percentage that a redemption service charges for each transaction.

For simple services, such as PayPal and Google Checkout, it is a nominal charge per transaction plus a percentage of that transaction.

With larger merchant services organizations, the percentage per transaction may be lower, but you may encounter service fees, monthly minimums or minimum transaction amounts (often higher than $5.)

QUESTIONS TO ASK:
•    Do my customers expect the ability to use credit and debit cards for my products and services?
•    Does my competition offer this ability?
•    Do I expect this to be a significant part of my sales model?
•    Have I included the costs of this in my pricing structure?

All businesses must accept creadit cards to make it as easy as possible to buy from you and adding credit card acceptance to your business plans is just smart marketing.

Budget: Fees $30 - 200 a month depending on your quantity of sales