3 Factors to Consider When Getting A Merchant Account

Share via
Merchant Accounts

The world isn’t run by entrepreneurs alone, but without them, it would forever be cycling the same circle. And with the recent advances in communications technology, the weight of the entrepreneur in determining the world’s direction is only heavier. It is not easy to become an entrepreneur, as the world of economics is not a merciful place and losers are rarely afforded a second chance unless earned by teeth and claws.

Chances must not be squandered, and each decision must be taken carefully to avoid unnecessary adventures while taking advantage of the crucial opportunities that eventually make spectacular success a possibility.

…winners of the game are not necessarily those with the greatest talents and ambition…

With rapid changes occurring at a pace that makes even record keeping a challenge, the winners of the game are not necessarily those with the greatest talents and ambition, but those with the ability to be patient and delegate whenever there is a necessity. A successful enterprise is expected to perform one task with outstanding efficiency, and the chores that are secondary to the main mission must be handed over to a partner or subordinate at the minimum cost, for the maximum yield, to the maximum extent possible.

Procurement of human sources, publicity operations, and balance sheet oversight are some examples where delegation is almost unavoidable, but the intricacies and risks of managing payment services, credit card transactions and customer accounts are so great that obtaining expert advice and assistance may assume the nature of a survival issue.

In the Middle Ages, merchants able to count coins by hand would hardly feel satisfied or relaxed without the services of skilled and trustworthy accountants. Fraud, confusion, taxation, and many other financial problems caused many an entrepreneur headaches in the past as much as they do today. How much more so is it the case now, with technological progress incomparably faster, the resources and skills of criminals much greater, and the demands of customers just as fickle as they were back then? Transacting by credit cards, and handling payments through modern means is in itself a business where innovation and progress are appreciated and sought by companies chasing the cutting edge with ferocious competitiveness.

By contrast, the entrepreneur, who in the best case is the master and visionary of his own field, knows hardly a thing about the complexities of this violent competition, and understandably so, since he has to give his everything to succeed in his chosen field, with little energy to spare in order to deal with the tricks and surprises of crooks, the details of payment procedures and the like.

There is, as one can see, demand for a kind of service that will allow the self-employed, entrepreneurs and visionaries to focus on the revolutions that they would like to effect, while remaining to some extent isolated from the mundane yet necessary details of running a business. Companies that work to meet that demand are the next step in the natural evolution of the market place, but unfortunately, choosing among them the suitable one to delegate the delicate task of payment processing can in itself be a daunting task. At this point an intermediary that will scan and list such firms at no cost to the entrepreneur is a great boon.

Although the initial setup, the costs, the details that need to be considered, and the procedures can be somewhat intimidating, there is no question that any business with more than the flimsiest aspirations will benefit greatly from a merchant account. For small scale enterprises, that have barely any staff, perhaps a PayPal account will be satisfactory. However, as soon as expansion becomes necessary, and order volume increases, the modern way to process orders must be a merchant account.

Finally, while getting a merchant account is not particularly difficult, let us consider some of the pitfalls and caveats that ought to be kept in mind:

1. Credit Rating: Startups, companies with a history of defaults, tax issues, or a risky customer profile may have difficulty in finding a suitable merchant services provider. And even an initially welcoming firm may in time change its attitude faced with a list of problems. For companies in the high risk category it may be necessary to pay higher than usual rates.

2. Rapid Growth: Merchant services is a very fast growing business segment, and rates and discounts are likely to improve over time towards greater cost-effectiveness. Rather than sticking with one provider, it is advisable to keep an open mind and stay on the lookout until the business has a more stable profile.

3. Cost: In spite of the great advantages they bring, merchant accounts can be costly. Statement and annual fees can reach beyond $100, but in the best case, should be waivered by the provider. A monthly minimum of $25 is charged by some firms, which should, in the ideal case, be eliminated. The discount rate, which is the amount that the provider deducts from the value of a sale, can range between 4% and 1.5% or lower, and obviously the smaller the cut, the better for the business. In general, maintaining an aggressive attitude, and being eager to negotiate will enable lower costs in this developing industry.

Danielle Thomas is a graduate from Marshall School of Business at the University of Southern California, now working as a freelance writer, entrepreneur, and researcher. She covers a wide range of topics for www.merchantseek.com, a website that compares the rates and processing solutions from the top merchant account providers.