Merchant Account Basics for Small Businesses

A merchant account is an account necessary for companies to do business, and work much like a �swipe account' with which customers can make purchases with a credit or debit card. Merchant accounts authorize independent businesses to accept credit card payments, and is essential for all companies, but especially web-based ones, because it increases the company's overall credibility, makes purchasing more convenient for the customer, and ultimately increases the company's sales. Retail merchant accounts are the most popular. Other merchant accounts include Keyed, Mobile and Wireless, and Business to Business.

Businesses that are in need of a retail merchant account have to apply for the account with a bank or other provider, and are evaluated for approval, similar to when an individual is applying for a credit card. Upon approval, which can take as little as 24 hours, all merchant accounts come with a software application called a virtual terminal, in the form of a secure web page. This allows an authorized associate of the business to charge a customer's debit or credit card. Charges can also be automated when a customer makes a purchase online; this means the card can be charged right away without the assistance of an actual person. Businesses should also be able to ensure that at least 80% of their transactions will be handled using a credit card.

After a merchant account has been secured, additional credit card equipment must be purchased. This equipment includes portable credit card terminals, printers, terminal and printer combinations, and PIN number pads and check readers. Merchant accounts also require credit card processing software, and most businesses purchase this software from recognizable companies such as VeriSign and LinkPoint. This will enable businesses to accept all five major credit cards-Visa, MasterCard, American Express, Discover, and Diner's Club.

A keyed merchant account, also called mail order telephone order (MOTO), is an account in which the merchant is not able to swipe the customer's card through a machine. The credit card number is instead keyed into a computer software program or a credit card terminal. A keyed merchant account requires a higher credit card processing rate than a retail merchant account, because there is a higher security risk, as the credit card does not have to be present at the point of sale, and the merchant may not always be able to verify a customer's identity.

Mobile or wireless merchant accounts are used by traveling businesses at trade shows. This is ideal for businesses that are just starting out, or that don't have a permanent building. With a mobile account, businesses can set up an account in which transactions can be keyed into a cell phone-this is an automated response unit (ARU) account. This is suitable for smaller businesses with relatively low volume. For trade show sales or independent businesses with a higher volume, a wireless credit card machine can be purchased.