No matter what type of business you operate, it’s safe to say you provide a valuable product or service in exchange for compensation. Being able to conveniently accept credit cards from your customers—payment processing— is one of the most important facets of running your business. In today’s technical age, that means being able to accept credit card payments, which typically requires establishing a merchant account.
What’s a Merchant Account?
To explain it simply, a retail merchant account presents merchants the capacity to swipe credit cards via a terminal. A merchant account is an account used to temporarily hold the funds captured from credit and debit card sales before they are transferred to the merchant’s business bank account.
For business owners who wish to offer quick and accessible credit card processing to the growing number of customers using credit and debit cards, having a merchant account is ideal. When it comes time to establish a merchant account in order to accept credit cards, one of the areas business owners question is why potential payment processors are concerned about the type of industry their business does.
Why Your Industry Determines Your Merchant Account Type
Since merchant account providers are entering into a legally binding financial agreement with your business, they must take precautions to protect themselves. Every time the account provider processes a credit card transaction on behalf of your business they expose themselves to the risk of losing money. This is the reason obtaining a merchant account requires a screening / application process. This is also why certain industries require certain merchant account types and why some businesses that engage in the sale of certain products and services won’t get approval for a merchant account.
High risk accounts may require a specialist processor. Some examples of categories that may be considered high risk are Debt relief / consolidation, collection agencies, online pharmacies, escort services and online gambling businesses. Businesses that process large amounts of credit transactions may also be viewed as risky by merchant service providers.
The Various Types of Merchant Accounts
Retail Merchant Account
This type of merchant account is designed for merchants who do most of their payment processing at their retail storefront. Typically around 80% of their credit card processing transactions take place in person and their customers’ credit cards are swiped through the credit card machine. If you don’t swipe at least 80% of your transactions then you may need to establish another type of merchant account.
Small Business Merchant Account
Setting up the proper small business merchant account requires doing some homework as to which payment processing provider’s solution best fits with your business. For example, some merchant account providers may require additional confirmation of your business if your small business is newly established or operated out of your home.
Mail Order / Telephone Order (MOTO) Merchant Account
A MOTO account is for a business that wants to accept credit cards by phone or mail. If you conduct more than 80% of your business through mail order or over the telephone then a MOTO account is perfect for your business. There are different ways to set up your MOTO account, either with a mobile SwitchPay card reader, credit card machine, a software package or a virtual terminal.
Mobile Merchant Account
A mobile card reader like SwitchPay allows you to accept credit cards anywhere with your mobile merchant account. This can boost a business’ sales since accepting credit card payments no matter where your business takes you is more convenient for your customer. Imagine mobile payment processing a right on your iPhone!
Ecommerce Merchant Account
When you have a website and conduct the majority of your sales via the Internet, than an eCommerce merchant account is your best option. Switch Commerce and most merchant account providers include an electronic payment gateway as part of the package.