So you’ve started a business – congrats! …and you aren’t providing your services for free (right?), so you realized that you’ll need a dedicated merchant account  to accept payments. You’re talking to different merchant account providers about the services they offer to find the right fit for your business, but what questions should you ask? We’ve pulled together the top 7 questions to ask when you open a merchant account for you to keep at your fingertips when you are shopping around.

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What is a merchant account?

An obvious question to ask…but it’s important to understand what you are signing up to get. Simply put, a merchant account is an agreement between a business owner and a bank that allows the business owner to process credit card payments into their bank account. You can have two different types of merchant accounts – dedicated (for your business only) or aggregated (where your money is pooled with other companies) and there are benefits to each.  There are also several different services that can be offered by your merchant account provider, all designed for businesses that take payments in different ways.

  • For example, if you run an online business, you’ll want to make sure you go with a merchant account provider that has a virtual terminal, or a designated way for payments entered over the internet. If you’re taking payments in a retail environment, you’ll want to get setup with a merchant account designed for swiped credit card transactions.

Can I do both ACH and credit card payments?

Most merchant accounts are only going to offer you the ability to process credit card payments. However, in order to give your customers more options to pay, it’s usually worthwhile to shop around for a merchant account provider that does both. ACH payments, also known as e-checks, provide you with the ability to process a payment directly from a bank account, and are usually more cost-effective than credit card payments.

Is it secure?

There are base levels of PCI compliance that need to be fulfilled by every merchant account provider, but it’s best to ask about how they keep your customer’s payment information secure and what you will need to do as a business to establish that level of security on your side as well.

How much is it going to cost me?

An easy enough question to ask…unfortunately, the answer isn’t nearly as simple. Merchant account providers will usually charge a percentage of the transaction amount along with the transaction fee in order to cover the cost to process the payment. Visa, MasterCard, and Discover all have different rates they charge depending on the credit card type that your customer is using. Debit cards and those that provide fewer points/rewards to the consumer usually process at a lower rate than do cards that provide things like cash-back bonuses and reward miles.

Most companies will bucket these different card types into categories of card payments call qualified, mid-qualified, and non-qualified charges (qualified being the least expensive to process, and non-qualified being the most). This is usually the easiest billing method and gives the most continuity when forecasting total cost each month. This is called “tiered” credit card pricing.

A less frequently used billing model is called “interchange-plus” pricing. Under this structure, the merchant account provider will charge the small business owner the wholesale cost of processing the credit card payment along with additional fees for processing the transaction.

This billing model can sometimes be more cost-effective, but leaves business owners at the mercy of highly fluctuating costs, and is often only available if your business is processing a significant amount of credit card transactions already.  It’s usually best to check with your merchant account provider to determine what’s best for you.

Are there any additional fees?

The most common complaint of a small business owner after receiving the first bill is due to a “hidden fee” popping up, turning what seemed like a good deal into financial burden.  Before signing up for a new merchant account, be sure to confirm all charges beforehand – some common charges that can spring up include fees for things like security compliance and customer support.

Is there a contract involved?

Lengthy contracts with hefty termination fees used to be the norm when setting up a new merchant account. However, as the number of merchant account providers has grown in recent years, so have the options for business owners, with fewer and fewer providers charging a fee should you need to cancel your account and even less locking you into a specific service term.  Be sure to confirm this before signing up for your own merchant account.

What if I have questions?

Even if you’ve done all your homework ahead of time, invariably you’ll have questions, and you’ll want some help once you start running payments.  It’s important to make sure that you’re working with a merchant services provider that’s willing to work with you.  Learn more about the support and service options they provide whether it’s a phone number, email, or online support center.

Unfortunately, the merchant account industry has a wide range of providers some with great support and some with sub-par options. Check with the Better Business Bureau, read reviews and customer testimonials, and get recommendations from other business owners before signing up!

So that’s it – or at some good things to think about. Choosing the right merchant account for your business is a very important decision, so be sure to understand what you are looking to do, and which company will help you reach your goals. If you need more information about the ‘scary’ world of Merchant Accounts, check out our complete A-Z Guide to the Merchant Account ‘Monster’!