Boost Your Business With A Merchant Account

It’s a fact. Companies who accept credit card payments for goods and services tend to generate higher revenues than those who only accept cash. According to industry statistics, the average credit card sale is $40 versus just $9 for the average cash sale.* If that isn’t enticement enough, consider the disadvantage you may face if competitors offer credit card payment options and you do not.

“These days, the credit card payment option is a must, whether you have a physical retail outlet, take telephone orders or sell products over the Internet,” says Diann Joblonski, a relationship manager, at Michigan Bankard Services, a leading merchant card processor serving over 30,000 businesses nationwide. Besides the potential revenue boost, credit cards may well be a cheaper alternative to cash and checks. In a case study prepared by Coopers & Lybrand, credit card processing costs average 2.7% of any transaction, checks 4.0% and cash 4.8%.** These figures make sense when you consider how many times paper money and coins must be counted and recounted by different individuals. While each business would vary in that respect, cash and checks still require more handling than plastic alternatives.

Establishing A Merchant Account

To offer the credit card payment option, you need to set up a merchant account-a bank account established by your company to receive the proceeds of credit card purchases. Typically, along with the account, you will also need to lease equipment and software to facilitate the transactions and ensure payments flow to your operating account. The process is slightly more complicated if you wish to accept credit cards online. In particular, you will need to sign-up with a payment gateway such as CyberCash or VirtualNet. These services allow for real-time credit card authorization for online transactions. It is essential that the payment gateway you choose is compatible with your software and financial institution so transactions flow properly.

Any number of financial institutions offer merchant accounts, but you should look for a provider who has demonstrated expertise in working specifically with small and growing businesses. These organizations can often structure accounts faster and at better rates than those who cater to larger companies. As you shop around, you should also look for institutions that work with customers to combat fraud and reduce chargebacks. And if you are conducting online transactions, you will want to work with a provider who has expertise in setting up and processing Internet merchant accounts.

The next step is the application process which can take anywhere from 48 hours to two weeks or more. Your chances of being approved relate to the nature of your business and the credit rating of your business and/or its principal owner(s). While existing retail establishments are the easiest to be approved, mail order and Internet businesses, with their higher rates of chargebacks and fraud, pose more of a challenge. “We look at the merchant, the nature of the business or the product, the refund policy, and the business financials or a sole proprietor’s own credit history,” states Joblonski. The cost of a merchant account will vary based on the perceived risk a business poses.

A Word About Costs

As you shop for a merchant account provider, you should be mindful of the costs involved with establishing and processing a merchant account. “You can expect to pay between $190 to $300 in start-up costs which includes the application, setup and equipment and rental lease deposits,” notes Joblonski. Processing fees can range from around 2.0% of annual sales volume for a retail establishment to 2.75% of annual sales volume for online transactions. Additional fees may also apply. Ask your merchant account provider for a complete list of fees so there are no surprises.

Putting It All Together

Congratulations, you can now accept credit card transactions. But are you maximizing the benefits of those proceeds? Maybe not, if those funds are being routed to a bank account that pays no interest on that money. Worse yet, you may have to wait a full month to get details on those credit card transactions, and have to pay for the privilege.

Is there a better way? Yes. Some financial institutions specialize in providing value-added merchant account services. For example, OneCore, a leading provider of online financial services for small business, pays money market rates on credit card proceeds. You can also view batch transactions (and transaction details) online by the next business day, free of charge.

Wireless Credit Card Processing is a relatively new service that will allow a person to process credit cards electronically virtually anywhere. Wireless credit card processing is a very desirable system, because it allows businesses to process transactions from mobile locations quickly, efficiently and professionally.

Wireless credit card processing is most often used by businesses that operate mainly in a mobile environment. These businesses include mobile utility repair service businesses, locksmiths, mobile windshield repair and others. There are even some upscale restaurants that are using wireless processing equipment for the security of their credit card paying customers.

While wireless processing is a very good system for many companies, it is not for all mobile businesses. There are some drawbacks to wireless processing that many potential wireless users should be aware of before they venture into wireless processing.

First: Wireless processing equipment is expensive.
There’s no way to get around this. Wireless credit card machines are the most advanced processing terminals available. You get what you pay for! You may be able to get a lease on a wireless terminal, but in the end you will pay significantly more than purchasing the terminal outright. For a wireless terminal with a printer, expect to pay at least $600 for a new terminal, and $500 for a refurbished terminal. If you find yourself about to purchase a terminal that is much cheaper than any others you find, it is most likely outdated equipment that uses outdated cellular networks. In other words, IT’S A SCAM, and you are about to buy a really expensive paperweight.

Second: Wireless processing comes with extra fees.
Just like a cell phone, wireless credit card machines operate on cellular networks. You have to pay for this cellular service in addition to the high cost of equipment. Luckily wireless fees for processing are nowhere near what they are for cell phones. Expect to pay $20 – $30 per month for a wireless service fee.

Third: Wireless Credit Card Machines are subject to cellular coverage blackouts.
I know what you’re thinking. My cell phone works almost everywhere, so my wireless credit card machine will too. Sadly this is nowhere near the case. Wireless credit card processing uses a business cellular network called the Motient or Mobitex network. Your cell phone uses a networks called CDMA or TDMA(GSM) networks. The coverage that your cell phone gets is much greater than the wireless processing network. There are at least five states with no coverage for wireless processing at all!

Fourth: You cannot process checks or debit transactions over a wireless network.
Currently due to federal regulations, it is impossible to process debit transaction, or electronic checks over a wireless network. This is something that will probably end up being allowed in the future, but as of now there’s isn’t sufficient security or encryption to process these transactions wireless.

What it comes down to, is whether your business does a sufficient volume of ‘credit card’ transactions and your area is within the Mobitex or Motient coverage area, to warrant the extra costs of a wireless processing solution. There are other solutions available for mobile businesses with lower volume or in no coverage areas that are better suited for these businesses.

Many companies offer outdated wireless terminals for sale on ebay or through special offers. They are selling these terminals to rip off the unknowing customer. These discount terminals use a wireless network called the CDPD network. This network is being abandoned as a processing network rendering these machines useless for wireless processing. Make sure the terminal you are buying is not a CDPD terminal. If the seller wont disclose, doesn’t know which network the machine operated on, or tells you that the terminal will still work, walk away. Its not worth loosing the money over.

Also in the next year, the TDMA and CDMA networks are scheduled to be opening up to wireless credit card processing. There are already several terminals designed to operate on these networks that are undergoing their final certification. These networks will open up most of the US to wireless processing even in areas that were restricted in cellular coverage before.

Mobile Commerce (m-commerce) isn’t a new way of processing credit and debit cards. The acceptance method has been around for a few years, but is just really starting to make a large impact on how we do business away from our offices.

m-commerce first started with the use of wireless POS (Point Of Sale) swipe terminals and has since then made its way into cellular phones and PDA’s (Personal Digital Assistants). Wireless POS swipe terminals are much more expensive (usually around $399 and up) then regular “wired” terminals which require you to be nearby a phone jack and electrical outlet in order to operate. As a result, this has caused many people to find alternative ways to process transactions while their “on the road” — at least until now.

Cellular phones and PDA’s have largely grown in popularity and as a result manufacturers have made significant improvements and added features to attract even more consumers and meet current owners demands. One of those features is wireless transaction processing. Imagine being able to process credit card and debit card transactions wirelessly within seconds at tradeshows, business seminars, house calls, etc.

Before m-commerce solutions became available collecting funds for orders done “on the road” required people to either pay by cash, check or write down their credit card information so you could process the transaction later back at your office. The fact is, cash and checks can get lost and credit card information, if not put in a secure place, can get into the wrong hands between the time the information was taken down and the customers card was charged. m-commerce solutions have taken a lot of the hassles out of doing business “on the run.”

Improved cash flowSecure credit and debit card authorizations within a matter of secondsReduced instances of credit card fraud and chargebacks
Ability to conduct business where phone line connections don’t exist

1.  Cell Phone Wireless Credit Card Processing

Wireless processing via your cell phone is probably one of more cost effective ways to process cards on the road.  Not only does a service like this work with cell phones, but also any phone for that matter.  Thompson Merchant Services offers a very appealing wireless processing package and I would highly recommend it.

2. Virtual Terminal or Software – If you have a laptop (notebook) computer that’s able to connect to the Internet while you’re mobile (on-site, at a hotel, etc.) then you can process credit card orders securely over any Internet web browser. Since you cannot swipe the clients credit card the processing fees are slightly higher, however you don’t incur the high costs of purchasing a wireless swipe terminal which ranges approx. $399+. If interested, contact any Merchant Service Provider for details and pricing. Virtual Terminal is almost always coupled with the purchase of a Real-Time Internet processing solution. If you already have a Real-Time solution check with your Merchant Account Provider on how to process orders via your Virtual web-based terminal. The Virtual Terminal solution is nice since there’s no software to install and no long-term leases to be bound to.  Typical price ranges from around $99 and up, however there may be no additional cost if purchased along with a real-time processing solution.

3. Wireless, portable POS swipe terminal ($399 and up). If you’d rather just invest money in a wireless POS swipe terminal you can inquire with any Merchant Account Provider and they can meet your wireless terminal needs. There are wireless swipe terminals available that have embedded printers and those that don’t. In general, you can expect to pay a lot for these terminals, and even more for those that have their own printer embedded within the unit itself.

4. AirCharge offers solutions for both Cell phones and PDA devices. Their PDA wireless processing solutions can be hooked to a card reader so you can obtain the lowest rates possible for your face-to-face transactions. They have several solutions available for both PDA’s and Cell phones.

5. BlackBerry 2-Way Pager with magnetic card reader. Wirelessly process credit and debit cards on the go and ensure you get the lowest processing rates possible by using a magnetic card reader attachment for the pager. Rapidly decreases the chances of fraud and chargebacks. NextDayFunding and ePayWireless are two companies that offer solutions for the BlackBerry pager.