The Importance of Asking the Right Questions Before Using a Merchant Account

By: Ryan Attelle

A merchant account is always considered a huge advantage for any business looking to increase there sales and accept more payments. It is important for businesses to understand that although merchant accounts can pave the road to higher sales, lower processing rates and simpler manageability, they can also give businesses some major headaches. It is important to ask the right questions before getting started so that a business can run as smooth as possible and profit as much as possible from there new merchant account.
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A merchant account is basically a bank that’s going to processes credits cards payments. In doing so a merchant account is actually extending a form of a line of credit. Through a contract this line of credit is extended to a business that wants to be able to take payments from a particular brand of credit card. With out this contract a business will not be able to accept payments from most major credit cards. Most merchant account service providers see this as a short term loan, but only in the scene that they are factoring the money for said business. Most merchant account providers give the business there money with in two to three days. This is not always the case as with higher risk businesses or businesses that take longer for delivery.

The reason why businesses need to sign contracts and are evaluated by the merchant account providers is because when given the power to process credit cards there is some risk involved for the provider. Essentially anyone who can process credit cards can potentially do so fraudulently, and then disappear. That being said, not everyone is accepted for a merchant account, there is an approval possess. On approval a contract is signed.

Some things a business will want to know when looking at merchant account providers. In most cases merchant account providers are very happy to give a businesses a new account, it is what they do. But maintaining that merchant account and keeping it running is a different story. Some times a business is to successful, and they start processing far more transactions than anticipated. Sometimes this will prompt the merchant account provider to shut down the account because they see the instant success as suspicious. On the other side of the spectrum, a business signs up for a merchant account and doesn't process enough. In the end they waste there money on added fees and penalty due to the lack of money passing through the account.

Of the things to look out for are account maintenance fees, monthly fees, and minimum transaction fees to name a few. If a business is unable to meet these standards per the agreement then there are penalties. It is also very important to know what the limits are, so not only are there minimum transaction fees, but monthly limits, and if this limit is exceeded chances are the account will be shut down. With this in mind in is important to find out what a merchant account providers policy is on increasing minimum limits, and also what there flexibility is if the business is to experience a sudden influx in transactions

If a merchant account provider states they have no limits, which is rare, it can be expected that they have what is called a reserve. A reserve is a percentage of sales with held for a specific amount of time until all transactions have been fully processed, and this can be an issue for some businesses with already restricted cash flow.

What business owners have to understand is that a merchant account provider has a lot at stake and actually has a lot of liability. They have to protect them self’s against a number of risks, one such being charge backs. When a customer claims a faulty charge or is dissatisfied with a product or service they can attempt a charge back, and argue with the merchant account provider for there money back. The merchant account has to put up for this at first. With that in mind businesses should also find out what there policy is on charge backs.

It seems like a lot to process but it is important for a business to know what is what in the world of merchant accounts. All to often a business goes out into the world with a new merchant account and accedes there limits, or get too many charge backs, get shut down and can no longer process the credit cards. So business owners need to read the fine print and understand there merchant account inside and out so that they can best utilize all the major benefits to having one.
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