A merchant account is an absolute must for any business looking to accept credit or debit cards as a form of payment at their establishment. However, it will empower a merchant to do much more than simply accept credit cards. With an account, a business owner can also apply for check conversion or check guarantee services; as well as accept checks. They can establish gift and loyalty programs, providing incentives for customers to return to their business. They can create websites where clients are able to shop. Simultaneously, though, merchants are able to create online shopping carts, in place of websites, where they accept payments online. They have multiple options for accepting payments through the internet. The possibilities for a business owner to expand their realm of payment acceptance to clients through an established merchant account are vast.
A merchant account is created through an independent sales organization (ISO) or merchant services provider (MSP). These are third parties licensed to broker credit card services with banks that actually process credit card transactions. Additionally, these third parties offer extra services to merchants --which usually are not available to the merchant if working directly through a bank--such as: 24/7 customer and technical service, free placement of processing equipment, mobile processing, settlement management, paper storage, etc.
Likewise, there are some requirements to establish a merchant account. Most ISOs and MSPs require the merchant to agree to a contract, establishing the terms and conditions of the account. The contract may be for three years; there may be an early termination fee (ETF) associated with it if the merchant decides to close the account sooner than the expiration date. Additionally, the merchant account will be required to adhere to the Payment Card Industry’s (PCI) regulations for card processing. These rules pertain to how the transaction authorizer submits the card information to the processor, how the authorizer stores the card information, and what their obligations as the service provider are.
It is also important to consider the pricing. There are different options available. Accounts can be established on tiered pricing: the cards processed may only incur one of three or four established rates (qualified, mid-qualified, and non-qualified percentages). Or, accounts can be set on Interchange Plus Basis Points pricing: credit cards processed may be based off the actual interchange rates and additional basis points. What sort of pricing schedule to place a business on is a decision made between the sales representative and business owner. There may also be other fees attached to having a merchant account, some of which are authorization fees, transaction fees, monthly minimums, statement fees, and annual fees. All of these depend on how the business owner would like to establish their relationship with the North American Bancard and what their business needs are.