Which merchant account type is best for my small business?

Which merchant account type is best for my small business?

Choosing the right account based on how you do business

When you start looking for a merchant account for your small business, you want to find the right service at a reasonable cost. Not only are there several different merchant account providers with different services, fees and discount rates, but there are also different types of merchant accounts. Choosing the right type of merchant account for your particular business requirements will make it easier for you to handle credit card payments from your customers and will also save you money as compared to other types of accounts that are not as well-suited to your business.

Types of merchant accounts
As pointed out by Dustin Walling in an article for Inc. magazine, choosing the least expensive merchant account can be costly if that account is not the right match for your small business needs. For example, if the merchant account is designed for brick-and-mortar businesses that swipe a credit card, but you need to process credit card payments electronically, you may be charged extra fees, surcharges and penalties.

The type of merchant account you need depends on how you make sales and process credit card payments. A retail merchant account is designed for businesses that physically swipe the customer's credit card through a credit card terminal. Retail accounts may offer the lowest transaction fees since the risk is lower when the customer and credit card are physically present. But these accounts may also have the most restrictive rules.

Mail order or telephone order merchant accounts are for businesses that do not have the physical card present. The credit card information is entered into a terminal with a keypad, and is processed using software installed on a personal computer.

If you make sales through your website, you need an Internet merchant account. A virtual terminal allows you to use a payment service gateway to process the transactions. You use specially designed forms or a shopping cart application on your website to process the payments.

If you take your business on the road and makes sales at trade shows, fairs or at your customer's location, you may need a wireless merchant account. With this type of account, you use a wireless credit card terminal that you can take with you and process the credit card payments wherever you go.

Choosing the right type of account
Merchant accounts in which the physical card is not present involve a higher degree of risk, so the fees can be higher, but the rules are generally less restrictive than retail merchant accounts for brick and mortar businesses.

Your business may involve different venues. For example, you may sell at a physical location, have a website, a catalog and make sales on the road, and you need to process credit card payments in different ways. In this case you have to determine whether one merchant account can handle all your needs at a reasonable cost, or whether you need more than one merchant account.

The Merchant Account Guide provides a comparison of different merchant account providers, broken down among retail, Internet, wireless, telephone and mail order merchant accounts. Here you can find the various merchant account providers and information on the services they offer and their fees. The fees are broken down among the discount fee (the percentage fee that you pay on the amount of credit card sales), the transaction fee that applies on each individual transaction, the gateway fee, statement fee, monthly minimum and startup fee.

Published: September 28,2023