Types Of Credit Card Merchant Accounts

Types Of Credit Card Merchant Accounts

To accept credit card payments, you need to hire a merchant account service provider responsible for processing the credit card transactions. This service provider has to offer you a processing solution with features, rates, terms, service and incentives that are best suited to your business needs. A good place to start, prior to selecting your credit card processing solution, is to know the different types of merchant accounts available. Understanding the different merchant accounts and their features will enable you to understand the type of credit card processing solution you should go for.


Two-types of merchant accounts

Merchant accounts can be separated into two main categories:

• Card-present merchant accounts
• Card-not-present merchant accounts

Rates and fees applied to these accounts are determined on the basis of a simple rule:

Higher rates and fees are charged to merchants who accept credit card transactions that are considered to pose a higher risk. Given this information, one can immediately deduce that rates charged on card-present merchant accounts are going to be generally lesser than those charged on card-not-present merchant accounts.


Card-present merchant account

Let us look at card-present merchant accounts a little further. The only way to qualify for a card-present transaction, which requires both the credit card and the customer to be physically present at point of sale, is to swipe the credit card in a terminal (a magnetic strip reader) that captures the data of the credit card electronically. Hence, a card-present merchant account holder must invest in some form of hardware that enables the process of electronic data capture.

Card-present merchant accounts can be further sub-categorized into two, based on the selected processing solution:

• Non-portable processing solution
• Portable processing solution

Non-portable processing solution is often preferred at retail locations. Credit card processing hardware is connected to phone lines or modems. When credit cards are swiped through the hardware, data is captured and real-time authorization is obtained. The costs involved are usually less than those incurred by a portable processing solution.

Portable processing solution may or may not be able to obtain real-time authorization. For example with a wireless merchant account, you enjoy real-time authorization with a portable magnetic card reader. However, as you may guess, it involves higher hardware costs and monthly rates.

A store-and-forward merchant account also provides a portable processing solution. The hardware used is often a similar portable magnetic card reader too. However, it can store the credit card data at point of sale and the merchant can forward these transaction details for processing at a later time when a phone line is available. The rates charged on this account is less than those charged on a wireless merchant account. A store-and-forward merchant account is also more affordable than card-not-present merchant accounts as it involves less risk. It is suitable for business on the move with large sales volume and smaller ticket sales.


Card-not-present merchant account

Usually, the cheapest card-not-present merchant account is the mail order merchant account (MOTO). All you need is hardware to manually key in information of the customer’s credit card. With an internet merchant account, you can start to accept credit card transactions over the net. The credit card processing software required for this purpose is usually affordable and comes with security features. It is essential for an online business.

The last card-not-present merchant account employs a latest innovation and is referred to commonly as telephone merchant account. It is probably the easiest to use as it requires only your mobile phone or a telephone. It gives you portability and you can accept payments on the go. With no hardware cost involved, it is truly value for money. Every business is unique and you must recognize your specific business type and needs. Find the most suitable match in merchant account and hire a merchant account service provider which will not only help you make money but also to save money. Ensure that the increase in sales brought about by your credit card processing solution is greater than the costs incurred by investing in the solution.