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Accepting Credit Cards as a Merchant

4 min read
By Brendan Harkness Updated Aug 18, 2021

With the growing use of credit and debit cards, businesses have begun a transition to merchant services providers and mobile payment processors. These payment systems allow businesses to easily give their customers multiple payment options.

If you want to accept credit or debit cards, you may consider implementing a merchant account services provider. This is typically a bank or other financial institution that provides a business with the tools it needs to accept credit and debit cards from consumers.

The merchant account services provider is the bridge between the business and the consumer’s payment method (credit card company or bank issuer). This ensures that the payment is processed and accurately withdrawn.

Although merchant account providers do cover all credit and debit card needs for a business, it is certainly not free. As a business owner, you will need to pay fees every month and per transaction.

Similarly to merchant service providers, mobile credit card processors have customers set up a merchant account to receive credit and debit card payments. With mobile processors, businesses can receive and process payments wirelessly.

Mobile credit card processors are best for merchants who want to accept their customers’ credit cards anytime, at any location. Some examples are small business owners, food trucks and street vendors. In addition, brick-and-mortar stores that want to provide the option of paying away from the cash register can make good use of mobile card processors.

If you’re looking for business credit cards to use yourself, check out our business credit resources.

What Is a Credit Card Merchant Account?

Before we jump into the details of merchant service providers, let’s tackle the definition of “merchant account.”

If your business is planning to accept credit and debit card payments, you’ll need a place to receive the money. That’s where credit card merchant accounts come into play.

A merchant account is basically just a bank account that receives money from debit and credit card transactions.

Each time a card transaction occurs, the resulting payment gets transferred to a merchant account. The money can be funneled into a standard business account afterward, usually on a regular basis.

If your company does business both at a brick-and-mortar location and online, the merchant account for card-present transactions may be different than the one you use for online transactions (you’ll see more about that below). Regardless, due to the prevalence of credit and debit cards, virtually every modern business needs at least one merchant account.

How to Decide on a Merchant Service Provider

When choosing a provider, you should consider many factors including the costs, how easily you will be approved, the equipment offered, and the types of customer service available. For businesses that mostly sell their products or services online, it will be necessary for the merchant services provider to include all of the Internet-based features, including virtual payment terminals and payment gateways.

The Ways Companies Can Accept Payment

When you open a merchant account, be sure that the provider offers the type of account you need to run your business.

The types of merchant accounts you can choose from include:

  • Internet merchant account: Businesses that operate online should use this type of account. Through this option, businesses have the ability to process credit and debit card payments through their website with a virtual terminal.
  • Retail merchant account: This type of account is typical for businesses that have a storefront location. In this option, the customers’ credit and debit cards will be swiped through the payment terminal at the point of sale.
  • Mobile credit processors: These processors allow businesses to use their iPhone, iPad, and other smartphones and tablets as payment terminals. This allows businesses to accept payments anywhere there is mobile service.
  • Mail or Telephone Order merchant account (MOTO): An account of this type accepts and processes payments by phone or direct mail.

Fees for Merchants

Transaction Fees

  • When a buyer pays with a credit or debit card, merchants pay 1.5% – 4% of the total purchase amount to the credit card issuers (a cost that stores may now pass on to consumers, see above). These credit card processing fees can be especially onerous for small, mom-and-pop stores where low-volume, low-cost purchases are common.

Terminal Rental Fee

  • Merchants must rent a credit card processing terminal, generally for $20 to $100 a month

For consumers, the best way to avoid unnecessary hidden fees is to know everything about your credit card—take the time to read the fine print or ask your bank. Be aware if the shops you frequent are implementing the new swipe fee. And comply with the terms of your card – make all payments on time and avoid going over your credit limit.

Preventing Stolen Credit Cards from Being Used on Your Ecommerce Site

Credit card fraud is a serious problem, and unfortunately online merchants are one of the most popular targets for fraudsters. It’s easier to be quick and remain anonymous while testing credit card numbers with online sites rather than brick-and-mortar, and many small businesses aren’t taking the precautions that larger ones do.

So what can you do to protect yourself? Here are some tips for preventing and tracking fraudulent credit card use on your website:

  • If outsourcing your shopping cart, use a secure, professional service.
  • If managing your own shopping cart, keep all of your software up to date.
  • Make sure that you are completely compliant with PCI Data Security Standards.
  • Enable Address Verification and Credit Card Code Verification in your shopping cart.
  • Use tracking numbers for all orders.
  • Collect ISP information for all orders, and compare the geo-locations to user-submitted addresses. A difference in location is a warning sign.
  • Check if a proxy server was used for transactions, keeping the buyer anonymous.
  • Check the validity of shipping and profile information: phone numbers with correct area codes, addresses, etc.
  • Set up an alert system and/or train employees to check for suspicious activity, like a huge number of purchases or many different card numbers being used in the same time period from the same IP address, or unusual international orders.

Quora Question and Answer

Online Payment Gateways and Processing: With the rise of digital wallets, what are the implications to “Card Present” vs. “Card Not Present” transactions/trends/policy?

The rising popularity of digital wallets has raised new questions about how credit card payments are processed. Do digital wallet transactions count as Card Present transactions or Card Not Present? Learn the steps involved in credit card payment processing, and how digital wallets impact the way payments are made.

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