Several months ago we were in the market for a merchant account for another site that we have been working on. The site build was taking much longer than it was supposed to and I felt pressured to make sure that we didn’t do anything to hold up the process. As a result, I made some hasty decisions with regard to our merchant’s account. Decisions we’ll be paying for monthly for over 3 more years.
While I am sure that most of you know what a Merchant’s Account is, there may be a few that do not, so let’s first talk about what it is.
What is a merchant’s account?
A merchant’s account is what allows you to accept credit cards in payment for goods and services. Along with a merchant’s account you also need a gateway and a bank account. A gateway is like a clearing house for credit cards.
Who needs a merchant’s account?
Anyone that wants to accept credit cards for payment will need a merchant’s account. I would have to say that all offline businesses have a merchant’s account. I can’t imagine any that do not accept credit cards although I am sure there are some. Not accepting credit cards does not make good business sense though. There are many people these days that do not carry cash.
Things to consider when researching merchant’s accounts
First, don’t assume that your banker knows anything about merchant’s accounts. This is the first lesson we learned. We went to our bank and spoke to the commercial banking representative. She told us that she didn’t know a lot about merchant’s accounts but explained that they regularly worked with a specific company (which shall remain nameless for now). Little did we know, she did not really have a clue about merchant’s accounts.
Second, if you learn that you have to sign a contract for any length of time – RUN! Any merchant services company that wants you to commit long-term is probably doing so because their service is not what it should be or they are very over-priced. Locking you in is the only way they can keep customers. There are many reputable companies out there that work on a month to month basis. These companies are going to be highly motivated to provide good customer service in order to keep your business.
When evaluating companies on prices, be sure you have all the facts. All of the companies that I have researched charge a percent of sale as well as a transaction fee. Some companies also charge a monthly fee and a fee for the gateway. Some companies (like the one we are with) have an annual fee that can be quite steep, especially when you are not expecting it. When trying to determine which company to go with, be sure you know all the fees associated with having an account with them. Don’t be surprised by hidden fees. Believe me, the fees can break the bank if you are not ready for them.
In my next post, we’ll talk about a couple of different merchant services companies. Either one would have been a much better choice for us.
What’s your merchant’s account story?
photo credit Andres Rueda
