Merchant Accounts: What They Are and How They Benefit Your Business

Merchant Account Forum LogoThis is a guest post by Nisha Sandhu, Editor at Merchant Account Forum.

Whatever the nature of your business, a merchant account provides a seamless way to collect payment for the goods or services you provide. Merchant accounts are specialized business accounts licensed to accept credit card transactions, usually allowing payment from several major credit cards. If you have an online business, your merchant account must be coupled with an application program interface (API) gateway which actually processes your customer’s credit card payments.

How a merchant account benefits your business:

Being able to accept credit cards is essential to any business. The more convenient you can make the shopping experience, the more attractive your business is to potential customers. With a merchant account you can offer the customer a number of payment options and the ability to make a payment in seconds, which generally leads to increased sales.

When customers can pay for something instantly
They are far more likely to make impulse purchases.

Most merchant accounts provide customizable shopping carts to incorporate into your website. The transaction process is quick and easy and the customer is not redirected to another website to complete the transaction as they would be if you were using a third party payment processor. A complex transaction increases the likelihood that the customer will change their mind about the purchase.

When buying goods or services online, most customers are concerned about the security of their transactions. Internet merchant accounts use secure payment gateways to ensure that the customer’s credit card information cannot be comprised. They also offer you protection in the form of fraud control measures, protecting you from losses as a result of fraudulent payments or chargeback’s.

Merchant accounts offer accounting tools that can help you keep better track of your financial transactions. They provide monthly statements of all your transactions and payments and help you track your success with real-time reporting and payment trends. The information they provide makes bookkeeping easy and is invaluable at tax time.

A merchant account can provide you with consistent customer service. When you are accepting credit card payments you will inevitably have to deal with the occasional processing error, chargeback or other service issue. Having a merchant account representative available to help you resolve disputes with customers, obtain voice authorizations or simply answer any questions you may have, can allow you to deal with potential problems with minimal headaches.

If you want to grow your business internationally
merchant accounts can accept multi currency payments
allowing you to deal with overseas customers.

Having a merchant account gives customers the sense that you are an established, professional business, lending a level of authority to your website and increasing customer confidence in it. Add to that the ease and convenience with which customers can select and purchase your goods and services, and it will go a long way towards creating loyal customers who will not only frequent your website but will help advertise your business. You’ll also find that as your business grows and you experience a higher transaction volume, having a merchant account becomes increasingly cost effective. Merchant accounts are a boon to an online business.

AUTHOR BIO: Hello my name is Nisha Sandhu. I am 26 years old and I am an Editor at merchantaccountforum.com, whom I have been working with for two years now. I love to write and give online business advice to new and growing businesses.

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Comments

  1. Thanks for the comprehensive overview. Agree with your point that “The more convenient you can make the shopping experience, the more attractive your business is to potential customers.”
    Your post really helped me to understand merchant accounts and its benefits. It has great details and yet it is easy to understand.
    That’s what i was looking for. I will definitely share it with others.

  2. hi there are lots of problem while taking the merchant account if anybody wants to get merchant account with daily payment then contact us we provide complete package with company formation with bank account & merchant account .
    METHEW DC would love you to read ..Hello world!My Profile

  3. iPhone App Development says:

    Great Nisha, this seems fully business oriented and could be the best tool for payment collection. Thanks Growmap for sharing such an important piece of information.

  4. Today Merchant Accounts became an essential part of your business to increase your sale. It helps your business to get a large customer base.

  5. A merchant account is a must have! But the costs are pretty high. They will reduce as the competition increases, I hope

  6. It is really important that if you are an online or any business that does not process transactions face to face where the card is present, that you focus on the unqualified rate, as well as make clear what environment you are in. The costs of setting up an account as a face to face business and processing cards over the internet instead can be immense.
    Online Merchant Account would love you to read ..MerchantAccount.comMy Profile

  7. fee fighters says:

    Here’s a tip, every merchant should do an annual review of their statements to make sure they are getting a good deal. If you are getting “qualified” quotes, run run run from whomever is selling that.

  8. Jason Cantor says:

    For those of you that are sick of Paypal (like myself), you should be happy because Visa is unrolling its own Paypal killer according to this article: http://bit.ly/vmfsje

    Looking forward to making transactions online without their “help”!

  9. Payment Processing says:

    I think its great you wrote this simply because it informs merchants and help them become more educated about merchant services. There’s just too much confusion surrounding merchant accounts.
    Payment Processing would love you to read ..ATM Processing Tips For ISO & IAD ATM BusinessMy Profile

  10. I have a Paypal Merchants account. Now they deal with different kinds of credit cards, I don’t really see why I should get a merchants account with a bank. Maybe if I make a lot of money.
    Danny would love you to read ..Black & Decker NPP2018 18-Volt Cordless Electric Pole Chain SawMy Profile

  11. Merchant’s account makes transactions so much easier, faster and efficient. Also, we’re discussing about different ways through which we can transact but there are certain people new to online shopping so topics such as this is very helpful in spreading the awareness.
    Ryan Ward would love you to read ..110 Dove Ct – Featured Listing VideoMy Profile

  12. Merchants accounts are truly helpful doing business. You can have a secure business transaction and you can assure about the things you needed for your business. Great business comes with great strategies.
    Ron would love you to read ..Gynecomastia SymptomsMy Profile

  13. Wallpaper murals says:

    I enjoy using Paypal as a seller and buyer. I don’t particularly like the lack of customer service options available at Paypal when you do have issues. However, they are widely used and accepted and that’s convenient.

  14. I personally prefer PayPal, but I only have one item I sell. And, PayPal is so widely known. However, if I had several items for sale, then i would consider a merchant account. Not too sure I would appreciate the expense to operate one, though.

  15. Hi, Nisha,
    I do a lot of purchasing online, and you are right-the more options there are regarding payment, the more comfortable the client feels with it. I think it is very important when it comes to dealing with abroad sales-it is relevant for the international customers to be assured that the payment methods are verified and that there are plenty of them in the offer.
    Kristina L. would love you to read ..iCLIPART Coupon CodeMy Profile

  16. At what point do you think it is necessary to get a merchant account? I use PayPal and they do have a merchant account….

    • Hi Julie,

      It isn’t really a matter of “at what point” as much as it is do you want to lose sales from those who don’t use PayPal. Since they started allowing people to buy through them with credit cards from elsewhere that percentage is probably far less than it used to be, but there are still likely to be some people who don’t want to use PayPal and would buy if you would take their credit card directly. What that percentage would be is hard to guess.

      There is always a trade-off between increased overhead and lost sales. Until you have sufficient sales to more than cover the cost of a merchant account you will probably want to stick with PayPal. Once you have a greater income you should consider a merchant account IF your income is sufficient to always cover that cost and then some.
      growmap would love you to read ..Small Business Influencer 2011 @SmallBizTrendsMy Profile

  17. Do you think that PayPal and mobile services like Square will eliminate the need for a merchant account? I only do small volume transactions and affiliate sales, so I have only used PayPal. But with a lot of big sites accepting PayPal, the trouble you have to go through for a merchant account seems pretty unnecessary.
    Hugh Kimura would love you to read ..5 Reasons To Go To Affiliate Summit EastMy Profile

    • Hi Hugh,

      I don’t believe they will because I still come across people all the time that do not have PayPal accounts – many have never even heard of PayPal! While many of us have used PayPal for years, some people don’t buy online much so they don’t have PayPal cards.

      If you could get a debit card from PayPal more quickly that could happen, but as long as you have to wait several months before they allow you to order one that probably will not happen.
      growmap would love you to read ..Social Media and Increasing Website TrafficMy Profile

  18. charlotte says:

    Hi,
    I really like the article, thanks for sharing it…I’ve got a lots of ideas here…
    Hope to hear more from all of you guys…
    charlotte would love you to read ..Grand Bornand AccommodationMy Profile

  19. I am wary of online purchases but I have made a few. I know some people who never will make a purchase and others that purchase almost everything online. What I have found recently is on LinkedIn I am being approached by more and more merchant account businesses. I find that trend began a few months ago and continues to grow stronger. My business does not require such an account.

    • Hey Interior Decorator San Antonio,

      Did you know that you could possibly add to your bottom line by having a merchant account? I’m not saying it would…just that it could…and you might want to check into it a little more. Check out more info. about the benefits of being a merchant. There are so many businesses going this route because of the ease of payment for their customers – not including the fact that alot of customers prefer paying by credit card. Just saying…

      • It IS true that the more payment methods a business offers the more sales they can close because people want to use what they already have. I would think interior design purchases might be large enough that many of your potential customers would want to use a credit card to pay for your products and services.

        The exception could be if all your clients are either so affluent they pay cash or have that much money in their checking account or on the other end of the economic spectrum operate primarily using cash because they don’t use credit cards or checking accounts. In San Antonio either could be true, given the very large population but low average income.
        growmap would love you to read ..Social Media Analytics, The Book is Live on Amazon.comMy Profile

  20. Although I have bought many things online, I’m still very wary about doing internet transactions. You still keep hearing horror stories up to this day — almost on a daily basis. As nice as merchant accounts are, I still would not buy from online businesses that are not in the top 10, 20 or 30. Way too risky IMHO.

    • Hi Kyla,

      That is really too bad because supporting small businesses is the absolute best way to improve the economy and raise the standard of living for everyone everywhere.

      Why do people trust major corporations and big brands that treat us horribly and have lousy customer service and fear small businesses that care about us? That makes no sense to me at all.

      There are many ways to know that a seller is trustworthy no matter what the size. Look for TrustGuard Security Verified and Shopper Scanned Privacy Protected and many other similar third party trust solutions.
      growmap would love you to read ..Small Business Influencer 2011 @SmallBizTrendsMy Profile

  21. many small / mid sized business use paypal to accept payments because it can be set up quickly and it accepts all major cards. The only issues is reliability, which is very important when it comes to online payment processing . Thanks for the comprehensive post.

  22. Clark Minn says:

    I think merchant accounts can be effective in a business to grow faster…Thanks for the idea!!!
    Clark Minn would love you to read ..Breaking Weight Loss Plateau: 5 Tips You can DoMy Profile

    • Hey Clark,

      I agree with your article 100%. I love my sweets but know I have to build my metabolism up in order to burn the fat I intake from the sweets I eat. So, when I want to build it up, I have a bottle of water first thing in the morning, oatmeal for breakfast, salad for lunch, and a small portion of protein-filled meat with veggies and fruits for dinner. And of course I do a very simple workout (about 5 minutes). I can do this for awhile, then slowly add in a little something sweet. I feel great and lose weight!

  23. >>Being able to accept credit cards is essential to any business.

    Absolutely. In 2011, it’s easier than EVER to make this a reality for a business of any size. I’m still surprised by clients who imagine that this simple feature is out of their grasp when it couldn’t be simpler!

    I do remember the old days when online transactions were fraught with all kinds of pitfalls and potential complications… and I am not nostalgic for them.
    greg would love you to read ..10 Key Marketing Trends for 2011My Profile

  24. To be absolutely honest I don’t consider it wise to make online payments on websites who do not have a good enough alexa ranking or a reputation in the market. I’ve had my share of bad surprise when it comes to online payments on dodgy websites.
    Pam Sheraton would love you to read ..The Top 5 Things To Consider If You’re Self EmployedMy Profile

    • I know what you mean Pam. I have a low balance credit card for this very reason. This way if my card is compromised I’m never losing more than a few hundred Dollars at a time.

    • I agree, there are some safeguards that one has to follow in case of paying to some low ranking/authority sites, its better to go to some forums and inquire about it, you will be amazed at the amount of response you will receive.. it will certainly help you in deciding
      ellijay georgia cabins would love you to read ..Young Driver InsuranceMy Profile

  25. Gerald Evans says:

    Signing up for a merchant account is definitely a solid step in establishing the legitimacy of your business. Along with providing your customers with a secure and polished payment option, you are also able to save money over third party options.
    Gerald Evans would love you to read ..Merchant FocusMy Profile

  26. A few years ago when I first made a business website for a company I had to setup an Internet Merchant Account with the bank (IMA). I had never done anything like that before but it was a learning experience, negotiating rates etc.

    One thing I took away from it once it was complete was that in order to appear as a “serious” online business you need one, I think taking payments online through a third party is okay but you will always appear to be small time (like using a hotmail address rather than owning your own domain).
    danika would love you to read ..new driver insuranceMy Profile

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