Internet marchent Account

What is an Internet merchant account?

An Internet merchant account is a type of bank account that allows acceptance of credit card payments online. But an internet merchant account is not an actual bank account - it is more like a line of credit that enables the credit card networks to route funds to you quickly (within a couple of days) rather than having to wait for the credit cardholder to pay their monthly statements. Any online credit card transactions require a merchant account. It handles fraud checks on each transaction, as well as the transfer of funds from your customer’s credit card to your bank account.

Time required to setup an internet merchant account:

  • A few days to a week if you are located within US to take from US Banks.
  • Usually within one week for local Merchant Account.
  • Several weeks if it is International Merchant Account and if you are outside the US.

Merchant account pricing:

  • An Internet merchant account Setup and purchase costs are not very high.
  • Processing rates and fees for an internet merchant account are high, the reason for the higher processing rates being that the customer’s credit card is not actually swiped through a terminal (like in retail storefronts) because of which there is a higher risk of fraud.

Establishment of internet merchant account:

  • Through a bank
  • Through an independent sales organization (ISO) which acts as a third party between the merchant and acquiring bank (merchant bank).

Banks offer security, reliability and stability, but they are more selective when opening internet merchant accounts. ISOs tend to be more flexible towards riskier businesses, such as online casinos or adult sites, but they will generally charge more for accepting this risk. Also, they are not as regulated as banks and therefore may not be as dependable. So, it is always safer to go to a bank for opening internet merchant accounts.

The major drawbacks while dealing with banks are:
The time and involvement that may be required for software or equipment installation is something to keep in mind.
Banks usually have strict chargeback policies than ISOs. Charge-backs include disputed charges and fraudulent charges.

Choice of Internet Merchant Account Provider:
It is always recommended to go with someone with whom you have done banking earlier. Most people use their local bank to set up the account. So when you're ready to open a merchant account, the best place to start is with your local bank. If you have problems to get merchant account through your local bank, there are many companies that offer merchant accounts on the net.

The critical success factors depend on the following:

  • Products and Services
  • Business Duration
  • Internal Resources
  • Existing Solutions

Merchant Accounts Rates & Fees:
These are the typical fees you will see associated with a merchant account. Rates will vary from one provider to the other.

  • Application/Setup : $0 - $100+ (one time fee)
  • Hardware/Software: Purchase : $99 and up or Lease: $20/month and up
  • Programming : $0 - $100+ (one time fee)
  • Discount Rate : 1.49% - 4.5% per transaction
  • Transaction : $0.20 - $0.50 per transaction
  • Monthly Minimum : $0 - $25 per month
  • Gateway Access : $0 - $25+ per month
  • Statement : $0 - $15 per month
  • Daily Close-Out : $0 - $0.15 each day
  • Address Verification System : $0 - $0.05 per transaction
  • Charge back : $5 - $25 per instance
  • Reserve : Varies, ask the provider for details
  • Annual Fee : $0 to $100 per year

Merchant Account Tips:
Once you have your merchant account you will need to take necessary precautions to avoid charge backs and fraud. Here are some tips to follow:

  • 1.Collect CVC2 and CVV2 Verification Numbers
  • 2.Use Address Verification System (AVS)
  • 3.Scrutinize orders from developing foreign countries
  • 4.Let customers know what name will appear on statements
  • 5.Handle suspicious orders accordingly
  • 6.Watch out for orders using free e-mail addresses
  • 7.Signatures on delivery
  • 8.Request fax copies of ID and credit card
  • 9.Posting a warning message