Are you looking to accept credit card payments for your business? Then the first thing you should look at is setting up a merchant account. A merchant account can be established by any new or existing business that wishes to receive payment via credit card. Your business could be selling services, selling products, or some other type of business. It does not matter what type of business you have, as there are merchant accounts available for any type of business.
There are many benefits to setting up a merchant account with the most important being that your customers can pay you easily and quickly by credit card. Also, if you are looking to obtain financing through a bank or other institution they will require all types of credit cards to be accepted before they will finance your business.
This article is going to discuss the various methods available for accepting credit card payment at your business and some of the advantages and disadvantages of each method.
Let’s start by examining what a merchant account actually is and how it works; we will then move on to the various types of merchant accounts available, their advantages/disadvantages, and how you can apply for them.
Automatic Teller Machines (ATMs) are often considered to be a form of merchant account but actually they are not. This is because when you use your ATM card to take money out of your bank, the transaction is not completed immediately and instead it is held in what is known as a “batch”. A batch is just a list of all the transactions that have not been processed by the bank. This holds true for debit card transactions as well. So, while it is convenient for you to be able to take money out of your checking account using an ATM/Debit card, the transaction is not actually processed until a specified day and time at which point your bank finally processes all of the transactions on that list.
The main difference between an ATM/Debit card and a credit card is how payment is received at the end of each month as determined by how you process your batch file. When you use your ATM/Debit card at an ATM, the transaction is held in a batch just like any other check or credit card transaction. However, when you use your ATM/Debit card for purchases and you pay it off at the end of each month your payment is automatically drafted from your checking account to pay down the balance on the credit card.
If you do not pay off the balance in full each month your bank will charge you interest on any outstanding balance. It is because of this automatic payment feature that ATM/Debit cards are considered to be a form of credit card, rather than a form of consumer loan, or cash advance which would make it an actual “check”.
With a credit card, you are given a pre-arranged line of credit. You can use this money for whatever you want to as long as the balance is paid off at the end of each month – no interest charges or monthly drafts from your checking account will be assessed. The main difference between a credit card and a check is that once a transaction is made you cannot reverse it or get your money back.
With a check, the transaction is not finalized until the check has cleared through your bank and been deposited into the account of whoever you sent it to. For example, if I send a check for payment in full to a supplier for goods which have already been delivered, my supplier will not be able to cash the check until he deposits it. It takes several days for a check to clear so if I wanted my supplier to have access to my money as soon as possible I would give him a deposit slip with the following details:
This merchant account will enable your business website or brick-and-mortar store front to accept credit card payments from your customers. However, this is not the only way to accept credit card payments – there are many different options as we will see as we move along in this article.
The first thing you need to know about merchant accounts is that they always come with a monthly fee associated with them and that this fee varies from one company to the next. This monthly fee is always assessed no matter whether you are using your merchant account or not. This may sound counter-intuitive, but there is a good reason for it.
To obtain a merchant account, the credit card companies have to approve your business first by verifying that all of your details are correct. They then assign your business with what is known as a “merchant ID” or “MID”. This is assigned to you for one year and it enables your business to accept credit card payments through that merchant account.
Your credit card processing company will then install a special computer program onto your website which captures all of the sensitive information about the customer including name, address, phone number, email address, credit card number, expiration date and security code. This information is then transmitted to the credit card companies along with an authorization request which details how much money you want to charge them for that particular transaction. Once this authorization request has been sent each company will contact the customer’s bank to see if they are authorized to make that purchase.
Your bank will then let the credit card companies know whether or not that purchase is ok. A message will be sent back to your website confirming the sale and this will appear on your customer’s computer screen as a confirmation of their order. They can always cancel their order by contacting you within 48 hours of the original purchase but once they have confirmed it, there is nothing you can do and the sale has to be honored.