On Beyond Paypal, A Merchant Account Primer

 If your small online business has outgrown your Paypal account take a moment to pat yourself on the back and then learn some basics about the next step, Merchant Accounts.

To be able to process credit cards on their own computer a merchant will need to get one of the many processing software packages available. Some brand names to look at include, TakeCharge, PC Charge Pro, or Anycard. Which software package chosen will depend on the type of computer you have, PC or Macintosh, what additional features you are looking for, and which you find more convenient to use. You should expect to pay between $200 and $400 and most downloadable packages have a trial period before you have to pay.

Nearly every merchant account will charge a monthly statement fee. These fees cover the costs of providing statements of a merchant’s transactions during a given month and usually provide other reports as well. Normally, these fees are between $10 to $20 each month.

Almost all banks will require some kind of security deposit, particularly at banks without an existing relationship with the merchant. These fees are determined by a risk assessment of the merchant and can be very high, sometimes thousands of dollars. It is always a good idea to start with your own bank first when shopping for a merchant account.

Most banks will charge an application fee of around $100 that is non-refundable. This fee covers the cost of a credit check and other research and preparation required by the processor.

A standard merchant account will only cover Visa and Mastercard transactions. If you want to be able to take American Express you will most likely have to pay additional fees for that set up. Amex almost always cost a little more for each transaction as well. For this reason merchants will sometimes set a higher sales limit to process an Amex charge or less frequently add a small surcharge to the purchase.

Some merchant accounts will charge a monthly minimum fee. This is charge ensures that a merchant pays a minimum amount in fees each month. If a merchant’s fees do not equal or exceed a monthly minimum they will be charged up to the monthly minimum to satisfy their minimum fee requirements. Often times these fees can be avoided, not all banks charge them. Obviously, a merchant would want to find a bank that doesn’t have a minimum if possible.

Another charge a payment provider might stick a merchant with are chargeback fees. When a customer denies or refuses a charge made against their card and the bank is forced to return their money they will often charge the merchant a fee. The fees vary but are usually around $25 per transaction returned. When shopping for a merchant account ask about chargeback fees, some banks don’t have them and at others they can be quite small.

A final word of advice, be leery of banks that exist only online. Some are dishonest or have insanely high rates. A brick and mortar bank with a long history is always the place to begin your research. Not to imply all online bans are crooked, they are not. In fact, if you have the right information online banks often charge lower fees than traditional banks, just make sure you know whom you are dealing with.