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Merchant accounts – shop around

Posted by Michael Bloch in ecommerce (Monday June 12, 2006 )

Before you sign on the dotted line for a merchant account/credit card processing arrangement, be sure to check out all the fees – including what it will cost to get out of the arrangement if that scenario should eventuate.

Case in point: I was reading an article last week about a business owner who after 7 years under his merchant account arrangement decided to cancel and take his business elsewhere. He then was walloped with a $250 discontinuation fee.

To add insult to injury, the company first offered him a lower rate to keep his business – substantially lower. The merchant was left wondering why after so many years of giving the company his business, a lower rate wasn’t offered earlier.

Credit card processing and merchant accounts can be a very complex area – there’s all sorts of fees that may be glossed over until after signup. These won’t be hidden as such, but they are most likely to be in fine print, so ensure you check over contracts carefully. If in doubt, get the advice of an independent ecommerce consultant.

When shopping for ecommerce solutions, it’s important to realize that a merchant account and payment gateway are actually two separate components, unless you’re using an all-in-one type solution such as PayPal. Even though they are separate, often the services are collectively termed a “merchant account”.

A payment gateway interfaces with your shopping cart and securely routes shopping cart order information through the financial networks. The merchant account is where the proceeds of the transaction end up if the transaction is successful. From there the funds can then be transferred to your business checking account.

While separate, these service are often bundled together by agents/resellers whom you will most likely be dealing with when negotiating an ecommerce solution, rather than the gateway/merchant account provider themselves. The reseller is usually paid a small percentage of the transactions generated by your account; therefore there’s definitely some room for haggling for the best deal :).

Learn more about merchant accounts and payment gateways.


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