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Merchant Account Basics FAQ
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• What is a merchant account?

A merchant account is an account that a merchant, like yourself, has with a bank in order to accept credit card orders from customers. There are many different merchant account providers. Click here to search our online database of merchant account providers FREE!

• Is is better to lease or purchase? ...rent?

Always remember if you choose to lease you will end up paying more than if you would just purchase the processing solution from the beginning. Lets say you find a merchant account provider who will charge you $350 to purchase the real-time Internet credit card processing solution. Or they will lease you the same solution for $30 each month for the next 48 months. After figuring that up, in the end you will end up paying $1,440 for that solution if you chose to lease it for 48 months. That's $1,090 more than you would of had to pay if you just purchased the solution right at the beginning. Also, be aware the above calculations do not include your state sales tax on the lease or the amount charged for the damage/loss waiver. With these two additional costs you can end up paying as much as $20 more along with the lease amount charged for the solution. Another thing you may not realize is the 48 month lease is not cancelable, so even if you go out of business you may still have to pay on that lease until the 4 years (48 months) is completed.

There are some merchant account providers that can even set you up on a month-to-month rental program. The nice part about this is you can cancel at any time, unlike if you signed a contract for a 48 month lease. It's also nice if you don't have the money up front to purchase the solution. Right now there aren't very many that offer this type of program, however. Be sure to check off that you're interested in a rental program when you use our search function to find a provider. The rental program can only be offered to US-based merchants at this current time.

• Can I use someone else's merchant account to do my transactions?

No, this is an illegal practice known as "credit card laundering" or "factoring." Using someone else's merchant account to do you credit card transactions can lead to heavy fines and perhaps more.

• I have a swipe terminal for retail sales, and I will soon be selling online, will my rates be higher as an Internet merchant?

Yes, as an online merchant you will be charged higher rates because the fraud issue is considered much higher online than it is in the retail world.  The only rate changes you should see are in the discount rate and transaction fee.  Discount rates for Internet merchants range around 2.50% and transaction fees around $0.30.  Fees are different from provider to provider, but in general you can expect to pay around those terms, maybe even lower.  It might be in your best interest to sell your terminal (if already paid for or the lease is up) and use the money to upgrade to a Real-Time solution. With a Real-Time solution you will be able to do transactions automatically when someone orders from your site and also manually whenever a sale is made at your retail store. If you also do MO/TO (Mail Order/Telephone Order) the manual processing would work the same as for retail (face-to-face). Check with a Merchant Account Provider for details.

• What kind of processing solutions are available?

Real-Time Internet processing, retail swipe terminal, and computer-based processing. Check out our Solutions Guide for detailed information on each available solution, and to help you determine which is best for your businesses needs.

• What credit cards can I accept?

This depends on the provider. The most common cards processed are Visa and MasterCard. American Express and Discover accounts are also widely available by almost all providers. Some can even offer Diner's Club and JCB merchant accounts. Out of US merchants will be able to get a merchant account for Visa and MasterCard much more easily they can can for American Express and Discover. In fact, it may be nearly impossible to obtain a merchant account for American Express and Discover cards if you are located out of the US.

• How long does it take to get my account set up and to start processing credit cards?

Many providers can have you up and running in a week or less. Some do take longer, however. If you are an out of US merchant, you can expect the process to take as long as a month or more.

• When are my funds available?

It will take between 1 to 2 days for money from credit card purchases to show up in your account. It should never be more than 3 days, though. Some may even be able to offer same-day funding, however, at the time it's only available to retail merchants.

• What is a chargeback?

Click here to view our glossary listing on chargeback.

• How long does it take to setup a merchant account?

Usually anywhere from a few days to a week if you are located within the US. If your outside of the US you can expect it to take several weeks. The turnaround time frame varies from provider to provider and which banks they are dealing with in order to get your merchant account approved.

• I lost my merchant account from too many chargebacks, what can I do?

An excessive number of chargebacks on your merchant account can cause your Merchant Account Provider to drop you without notice. Once this occurs you are added to the MasterCard MATCH list (formally known as the Terminated Merchant File). All Merchant Account Providers have access to this list and if they find you on here they can refuse to issue you another merchant account. If you get on the list you may stay on there for several years. But, if you're on this list there is help. Bank Card Law ( http://www.bankcardlaw.com ) specializes in helping companies remove their name from the MasterCard MATCH list and educate them on how to virtually eliminate future chargeback episodes.

For more information on how to reduce and eliminate chargebacks visit our articles section.

• Are 3rd party credit card processing companies better than having your own merchant account?

In short, no. Third party services tend to add a cheap and unprofessional look towards your business. There are also other downfalls to using a third party processing service such as late funding payments, the hassles of going through a middleman, and lack of control of payment processing. Third party services should only be used if you don't have enough capital at the start-up of your business to support a real merchant account. Once your capital has grown some it is best to obtain a real merchant account for your company.

• I'm just interested in buying equipment or software, where can I go to get the best prices?

Four companies that offer both new and refurbished equipment and software are Terminal Outlet, MerchantWarehouse, and POS Credit Card Machines. You can actually save bundles by buying your equipment from one of these companies then obtaining a merchant account elsewhere or with them. Be aware if you go elsewhere for a merchant account you may be subject to a programming fee.

• What does "Authorization Only" mean when trying to process a credit card transaction?

By processing an Authorization-Only (often referred to as "Auth-Only") transaction, you are simply obtaining authorization for requested charges to a card, without immediately designating the transaction for batch settlement. Such a transaction type is useful for merchants who ship products and need to ensure that they receive all necessary address information.  After submitting authorization only transactions, you can select them for batch.  Batch is nothing more than taking all the credit card orders you completed that business day and submitting them all at one time, usually at the end of the business day.

• What does "Capture Only" mean when trying to process a credit card transaction?

When an authorization code has been obtained for a transaction (e.g. voice authorization), a merchant can capture these funds using the Capture Only method. The transaction will then be settled in the next Batch.

• I process transactions using the phone, but my rates are high.  What can I do to lower them?

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