Different businesses have different core competencies. Some are skilled
at providing excellent customer service, while others provide a product
that is unmatched in quality. But almost every company has one thing in
common with its competitors: they all have to get paid by their
customers or clients in order to survive.

More and more, that
means accepting credit cards for goods or services. But like most
marketplaces, there is a wide array of merchant services providers that
can process credit card transactions for businesses. So how can a
business owner choose the merchant account that is ideal for him or
her? Here are a few tips.

Select the right account type.

There
are many different types of business arrangements (or merchant
accounts) that are available to a company. Retail accounts involve
face-to-face purchases between a customer and a clerk or proprietor.
Internet accounts are structured to allow Web-based businesses to
accept credit card payments online via their websites or a separate
"shopping cart" site. Card Not Present accounts are designed for
companies which conduct business by phone, fax, email, postal mail or
any other method where the card itself is not viewed by the employee.
Mobile accounts can be tailored to meet the needs of companies whose
representatives accept credit card payments away from their home bases
(like plumbers or carpet cleaners). And seasonal accounts can be set up
for a business that only operates during certain months of the year
(like Halloween costume rental centers or snow blowing service
providers).

Be aware of the cost structure of your account.

In
addition to varying account types, there are also different ways that
merchant services providers collect revenue from businesses. Generally
speaking, most of these charges are recurring, per transaction or
situational. The most frequently assessed fees are those which occur
whenever a business authenticates a credit card payment. Merchant
services providers either take a percentage of each transaction (known
as the periodic rate) or charge a flat fee per transaction. They may
also utilize a combination of both methods.

Like credit card
accounts for consumers, the periodic rate can increase if certain
criteria are not met by the company. In addition, merchant services
providers can charge penalty fees for various reasons, such as failing
to reach a predetermined minimum number or amount of transactions per
month or falling behind on equipment leasing payments. Companies must
especially be careful not to incur chargebacks, which are
instances where the credit card holder disputes a charge by the company
on his or her monthly statements. Merchant services providers tend to
levy significant penalties for an inordinate number of chargebacks on a
given account.

Educate yourself about the middlemen.

Like
many aspects of business, merchant accounts incorporate different types
of middlemen which serve to facilitate credit card transactions. In its
most basic form, a consumer uses a credit card and the credit card
company (like Visa, Master Card or American Express) gets paid. But
these cards are issued by various banks (like Chase, Capital One, or
Citibank), which set credit limits for cardholders and screen out
non-creditworthy individuals.

These banks communicate with the
merchant or company through an entity known as an acquirer. The actual
credit card transactions are processed over networks and platforms
which make up the required infrastructure that is necessary for
authentication to occur. Finally, other companies, which are called
independent sales organizations or member service providers, take care
of procuring and operating the processing hardware and equipment,
bookkeeping software and other card-related services. All of these
entities take a cut of the revenue that passes from the consumer to the
merchant.

Consider offering customers alternatives to traditional credit cards.

Though
credit cards remain one of the most popular forms of payment, some
consumers may wish to use other means to pay for their purchases. For
example, a debit card transfers funds directly from a consumer's bank
account into the company's account (minus all transaction fees) and
requires a personal identification number to be entered before the
transaction can be authenticated. Many merchants offer gift cards (also
known as purchasing cards), which allow customers to use them only at
their businesses. These cards usually contain a preset amount of funds.

Finally,
loyalty cards can be used in conjunction with traditional credit card
transactions to allow customers to accrue and redeem "rewards points"
for savings on future purchases or even free gifts. Business owners do
not have to offer any of these choices to their consumers in order to
process credit card payments, but these cards can serve as additional
incentives for a customer to patronize their business.

Merchant
accounts are a lot like other business processes, including shipping,
supply chains and accounting. Even though they aren't directly related
to the buyer-seller relationship, they can cause countless problems and
require large amounts of time and money if they do not function
properly. That's why it is vital for a business owner to choose the
perfect merchant services provider for his or her individual business.


Jim Hildebrand is a freelance writer who writes about a range of topics including merchant accounts.