Typically, businesses that have a need for a merchant account are large, utilize multiple processing venues and/or need high volume credit card processing capabilities continuously. Today, medium and small businesses commonly get merchant accounts as a staple of their business. Many people seem to think that a merchant account is necessary if you’re small, but nothing can be farther from the truth. Today, a lot of merchants are relying on free and third party merchant accounts for various reasons and as every business has different needs, a cookie cutter credit card solution may not be the answer.

What is a free merchant account? Basically, it’s a merchant account owned by a third party merchant provider or processor to process credit cards and route the money to your bank account. With E-commerce so prevalent today, this type of transaction is easy for merchants and not difficult to establish. A lot of small vendors, like Ebay merchants use these types of merchant services due to ease. Some of the nice features of these types of accounts are that there is little background investigation, little paperwork and almost no real application process. Really, you can accept credit cards within a couple hours of applying. There really is no application fees, no virtual terminals and related programs and software, so the ease of set up, monitoring and maintenance is minimal. If you operate a brick and mortar business, there is really no reason to have one of these types of account services, and if you process credit cards more than once a day, then this really is not for you. The down side to free merchant accounts is that even though the upfront costs are low or nil, and the ease of operation is simple; they offer limiting services and become increasingly expensive to use, the more you use them. The way they make their money is by charging a portion of each transaction, often times up to 10%, which is a lot more than 2.5-4% that you would pay for a typical E-commerce merchant account. As well, it is not uncommon for them to hold funds for security against chargebacks and processing errors. This isn’t untypical with regular merchant accounts, but isn’t as common. For example, if you’re volume spikes legitimately, due to an increase in your business, this may throw up a red flag for a processing agency to hold your funds until your volume goes back down. This is looked upon by banks as a higher risk of chargebacks.

Third party merchant accounts are similar, in that your business will be processed under someone else’s merchant account. Often times, established businesses with high volume capable merchant accounts will offer processing to like merchants within their industry or a similar industry with similar types of transaction volume and consistency. This can help a merchant who is temporarily experiencing low volume in their business to keep their rates low, as well they may offer lower rates to you than a merchant processor offering a free merchant account. Like free merchant accounts, there is no payment infrastructure, maintenance, minimal background checking and set up fees. However, you will have high rates, longer processing times and possibly security fees for impending chargebacks.

With both free merchant account services and third party merchant accounts you will run the risk of not getting paid at all, as they may be processing multiple businesses under one account and may get shut off by a bank, leaving you and everyone else unpaid indefinitely or until they get it straightened out. In today’s economy, and with international banks looking to gain US and Western European market share, small and medium size merchants are not only obtaining merchant accounts for themselves, but they’re getting great rates, specialized services like multi-currency processing, their own virtual terminals and third-party fraud scrubbing. Today’s merchant service provider is armed with a lot of ammo with banks around the world; a lot of these banks specialize in E-commerce and high volume merchant accounts. Many banks also offer great rates for high risk customers. With a little homework, merchants are going to find that start up and maintenance fees are lower than they think, operating and tracking their credit card business is not only fairly simple but they sleep better at night and ultimately they’re profit margins are larger.

For more information on echeck processing, high risk merchant accounts and online credit card processing. please visit www.stradafee.com!