Net Merchant Accounts Explained
Net merchant accounts terminology can be confusing and in order to get the best deal available for your business, you need to understand the different terms used. Here is a list of the most important net merchant accounts jargon that you will encounter.
Discount Rates The discount rate is the percentage of each transaction that a merchant accounts provider takes. It can be from 2% for your own merchant account to over 10% for 3rd. party processors. These fees are not as clear as might first appear as sometimes a higher rate may include a free shopping cart, digital delivery software etc.
Monthly Fees Most standard net merchant accounts will charge a monthly fee for maintenance of your account such as technical support, shopping cart etc. On the other hand most 3rd.party processors will not charge a monthly fee. They make their profit with higher discount fees per transaction. Monthly fees must be paid whether or not you make a sale. However, if you have a large volume of business, an internet merchant account with monthly fees but a low discount rate may mean you make more profit.
Settlement Time The settlement time is the length of time between a credit card being charged by your company and the time the money is deposited into your bank account. Usually net merchant accounts will have a settlement time of 2-3 days. Third party processing companies usually take 2-4 weeks to send you your money. Payments can be made directly into your bank account or a check can be sent to you. Having payments made directly into your bank account usually costs a little more. Nevertheless,the sooner you get your money, the sooner you can reinvest it in your business.
Processing Time A processing limit is the amount of money your net merchant accounts provider will allow you to accept. This limit is generally in the tens of thousands and not likely to affect most small online businesses.
Chargeback Fee A chargeback is a situation where a customers's credit card is charged, and the customer claims not to have received a product. A mistake on the part of the customer can happen if you use a 3rd.party processor. When a purchase is made, the name of the third party processor will appear on the customer's credit card bill. If you use a 3rd.party processor you must send an email to them after a purchase, informing them what name will appear on their credit card bill.
Can I use someone else's merchant account to do my transactions? Absolutely No. This practice is known as "credit card laundering" or "factoring". It is against the Mastercard and Visa agreement. If someone is caught doing this, it can lead to heavy fines. As well, you will also put that merchant's credit card processing account in danger. Why are transaction rates higher for Internet, Mail and Telephone Orders? Banks consider face-to-face transactions where the credit card is swiped less risky as fraud is lower. Consequently, these rates are lower.
How long does it take to set up credit card processing? This varies from company to company. It can take from 24 hours to 2 weeks. Very high
volume and International merchant accounts seem to take longest.
No. Shopping cart companies make their software compatible with certain secure gateways such as Authorize.net or Verisign etc. You should find out from your merchant account company what secure gateway you will be using. If it's Authorize.net, most shopping cart companies will support that gateway.
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