Why Use A Merchant Account?

What Is A Merchant Account?

One of the most important factors in the success of an online business is the ability to provide various methods of payment for their product or service. In a world where everything works virtually, it is imperative that customers have a choice in their mode of payment and the credit card is the payment of choice of most people.

In order for an online seller or merchant to be able to accept credit cards as payment on his web site, he has to have an arrangement with the banks or with a third party financial entity. One option is to sign up with a third party like PayPal and the other is to acquire a merchant account. A merchant account is a direct relationship with a financial entity that allows a seller to accept credit cards directly as payment for goods or services sold.

A business can acquire a merchant account from a bank, an Independent Service Organization (ISO), or a Merchant Service Provider (MSP). Once a business has signed a contract with any of these entities for a merchant account, it can begin to process credit card transactions online and have the payment deposited directly to his bank account of choice.

Advantages Of A Merchant Account
Countless businesses – both online and in the “real” world – have been using merchant accounts for a very long time now. This is due to the fact that having a merchant account has brought upon good benefits to their businesses. So why should you use a merchant account?

Increased sales

This is because more and more people are making use of credit cards. In order to convert these people into customers, you have to be able to cater to their preferred means of payment. With a merchant account, you are able to process their transactions using credit cards. More so, studies have shown that people tend to purchase more with credit cards than what they would normally buy with cash. As such, having a merchant account gives you the advantage of enticing customers to purchase more from your store.

Make customers feel secure

The idea of a secure payment gateway appeals to many online shoppers. One of the biggest fears of this sector is credit card fraud and ID theft as they conduct their online shopping activities. However, with a merchant account that is properly set up, you can guarantee secure transactions and fraud protection. As such, your customers will feel secure and keep coming back to your web site.

Keep better track of your transactions

With all transactions logged in electronically, you will have a more accurate account of all your business transactions. There is almost no room for error and you do not have the problem of having your accounts in order for tax purposes. The monthly statement of all your business transactions will automatically be generated by your merchant account provider, making it hassle free for you.

Disadvantages Of A Merchant Account
With all the advantages that a merchant account brings with it, there are also a few downsides to having a merchant account.

Pricing

One of the biggest concerns that small businesses have when it comes to merchant accounts is the fact that it comes with a price. Compared to other alternatives, merchant accounts may cost more for small businesses and start ups. This is due to monthly fees and other maintenance charges that may be charged each month regardless of the amount of sales.

Stringent requirements

Compared to European merchant accounts, merchant accounts in the United States are actually offered at cheaper prices. However, MSPs in the U.S. have far more stringent requirements. The reason behind this is that the competition is quite fierce, driving down the costs for merchant accounts. In order to make up for the lower cost, MSPs apply harsher requirements which may not be met by small and start up businesses.

TheBottom Line

The bottom line is in weighing your options. Would the benefits of having a merchant account outweigh the downsides of having one? Does your range of operations entail having to take out a merchant account? Only you can determine your needs and only you can decide on the proper course of action.