Businesses today, to be competitive, must accept more than cash as a form of payment. People simply do not carry cash as they once did. Paychecks are automatically deposited, and individuals carry credit and debit cards to pay for purchases. And long gone are the days when merchants took an imprint of the credit card and then deposited the imprint for their bank to process by mail. Funds could not be verified electronically, and it took weeks to receive credit for the funds.

Today businesses need a way to process their credit and debit card payments immediately. Online businesses in particular need a reliable credit card merchant to process their payments. Credit card merchants can process the payments electronically and verify funds immediately.

What are Merchant Services?

Merchant services allow a business to accept credit card payments from the customer by use of a card processor, which is connected by phone or computer to the card-processing center. The merchant will process the payment on the businesses behalf, extracting a fee from every transaction.  They verify and collect funds, and deposit the net transaction into your bank account.

A merchant account is not an absolute requirement, but it may take longer to receive the funds without one.  As in most cases, it is best to let the experts do handle the parts of business in which they specialize.  Many banking institutions offer merchant services, but they may require a new business to have a record of accomplishment.  Their rates are generally better so it’s a good practice to establish close ties and credibility with your banking institution; this can come in handy for future loans, property acquisitions, etc.

Fee Structures 

The first question to ask of course is what the fees are—not all credit card merchants are created equal. Similar to shopping for lower interest rates, it pays to explore the options for credit card merchants. Your next concern should be how long it takes to receive the funds. Next, ask what type of cards the processing company will accept and the rate variances; for instance, there is usually a higher rate for American Express (which is why many vendors won’t accept them).

The fees vary from merchant to merchant. Different type cards are also charged differently. Rewards cards are charged at a higher rate by some credit card merchants, and some will charge an additional fee if the card is declined the first time and the store clerk swipes the card a second time (just to see if it really doesn’t work). Small business owners must compare all of the so-called nuisance fees. 

What are the monthly or yearly fees for a merchant account? What is the early termination fee? Many processors will charge a fee if the business terminates the contract early. What is the chargeback fee if a refund is to be issued? Will the credit card merchant be available 24 hours a day for customer support? Some businesses may operate all night, so the processor should have 24-hour support.

Additional Considerations

Security is important, and businesses need to know their customer’s financial information is protected. You should ensure the credit card merchant adheres to the payment card industry data security standard, or PCI DSS establish by the Security Standard Council. This regulation deals with fraud in the credit and debit card industry. You should also read the Durbin Amendment passed into law in October 2011, which has added new laws and regulations concerning credit card swipe fees.

Of course, there are Point of Sale services available today “in the Cloud.”  These web-based services are more expensive and generally utilized by larger corporations or heavily inventoried businesses.  There are also services such as PayPal, Amazon, and Google Checkout that may be suitable for smaller companies or online-only vendors.

Keep in mind most credit card merchants must also compete, and they can only do this with their fee structures and with excellent customer services. As a business owner, you will want to look for strong support and the most reasonable fees that fit your business type and needs.

Tony Alvarez is a tech writer and content contributor to Merchant Maverick, where you can find credit card processing reviews for a myriad of processors such as Flagship Merchant Services. 

Business Credit, General Comparing credit card merchants