Just Open Your First Retail Business? Discover Your Payment Processing Options


Opening a retail business can be a daunting experience, but with the right information, some hard work and careful planning, the risk can be well worth it. If you’re just getting a new business on its feet or you’re planning on expanding your current business’s capabilities, it’s a good idea to have a firm understanding of all available payment processing options.

While in a perfect world, everyone would pay for goods and services in cash, the truth is, credit and debit cards are quickly becoming the most popular way people pay. In the modern era where instant results are a way of life, consumers often take your ability to accept credit cards for granted. If you are interested in processing credit cards as payments, it may be time to set up retail merchant services.

Merchant Accounts

A merchant account is a special type of bank account that allows businesses to accept credit cards, debit cards and in some cases, e-checks, as payment. These accounts are offered by merchant banks, which differ from regular investment banks in that they only accept legitimate registered businesses as clients. You may set up a merchant account either directly with the bank or through an official provider.

Merchant Account Providers

Since demand for merchant accounts is so high, and the risk sometimes great as well, merchant banks do not handle all account set ups alone. Third party contractors called independent sales organizations, or ISOs, act as liaisons between banks and businesses, specializing in arranging and providing merchant accounts.

One reason many new businesses choose to set up merchant accounts with ISOs rather than banks directly is that the vetting process merchant banks use can be quite rigorous. Unless your business has excellent credit and a proven track record, an ISO could be the best option for you. Fortunately, ISOs come with a number of benefits as well that banks cannot offer.

Benefits offered by ISOs vary from company to company, but usually consist of customer service, back office duties and settlement management. ISOs can also lease or sell any necessary equipment, such as card swipe terminals and paper supplies.

Of course, doing business with an ISO also comes with a longer contract. Before choosing a solid ISO, it makes sense to shop around and compare deals and to check credentials scrupulously. An ISO in good standing will be able to produce evidence of sponsorship by an FDIC-insured bank to insure you that you and your customers’ transactions are secure.

Kinds of Merchant Accounts

Merchant accounts are available in several varieties, each suiting a particular type of business operation. Depending on the kind of business you run, you may opt for a single type or a combination of accounts. These account types also come with corresponding levels of fees and charges, so making the correct choice can be crucial to balancing your budget.

Retail Merchant Accounts

If most of your business transactions take place from a storefront or other physical point of sale, a retail merchant account is likely your best bet for serving clients’ needs without breaking your own bank. This type of merchant account requires that at least 80% of all credit card sales take place with the card holder present.

Retail merchant accounts require the use of a credit card reader terminal. Processing cards with a terminal connected to the Internet allows you to either accept or decline a particular payment almost instantaneously. Such terminals are also capable of accepting payments via manually entered credit card information.

Since the instant processing of credit cards is considered the most secure method, per transaction fees are some of the lowest available for merchant accounts. The average rate hovers near 1.85%.

Internet Merchant Accounts

Internet merchant accounts allow businesses to process credit cards via a web-based purchase. ISOs offering Internet merchant accounts usually direct potential customers to a third party run virtual payment terminal, which collects billing information and sends the payment to the business’ account in about three days.

Internet payment processing is considered to be riskier than instant processing done in person. This means that rates are a bit higher so that ISOs can cover their interests.

MOTO Merchant Accounts

Mail order/telephone order, or MOTO, merchant accounts allow businesses to process credit cards remotely, by entering information manually via the web or by telephone. These accounts are considered to be the riskiest and come with hefty fees. They are also waning in popularity as Internet-based purchases replace mail and phone purchases.

A merchant account can be a boon to any retail business. More consumers rely on credit and debit cards for payment than ever before and the ability to accept them will likely increase business and help retain current customers. Take a moment now to discover the merchant account that fits your business plan.