Comparing Merchant Accounts - A Simple Way To Compare Merchant Accounts

Being able to take credit cards is very important to any company wanting to actively sell products and services on the Net. At the dawn of online business it was thought that relying on credit cards was a bad idea, because it was forcing an offline system to the Internet. Various companies offered alternative payment methods such as “beenz”, but the web-based currencies didn’t flourish. The truth is, roughly a decade on from the people starting to sell on the web, still getting our plastic out of our wallets to buy on the web and accepting credit cards as payment for products online is still as important as ever.

There are basically two ways to accept credit cards online. Let’s compare merchant accounts. Businesses can either apply for their own merchant account, which allows them to process credit cards in their own business name, or they can go with a third party processor, who processed the credit card charges on behalf of the merchant. Obtaining a full merchant account has higher upfront costs, but has smaller per transaction costs. Using the services of a third-party service provider costs less initially, but has higher per item charges.

Making the decision as to whether or not to go for a full merchant card processing account or use a third party processor is simply a question of running the numbers. Let’s look at two different business types and compare merchant account benefits…

In most cases, merchants who are actively trading offline and simply want to expand online will be more suited to obtaining a merchant account. Most likely, Usually they will already have a real world merchant account and will expand the remit of that account to add the ability to do “MOTO”, which is “Mail Order Telephone Order” processing and only means that the cardholder is not present at the point of sale.

For one-person businesses starting to sell products online, it’s think about testing their marketing using a third-party solution. The advantage to the new business is that there’s hardly any upfront cost which means they can test their market easily and cheaply. If sales boom, they can eventually look to reducing the per-item costs by getting their own credit card processing account. If the market isn’t profitable, they can at least exit the market without having paid significant upfront costs to get their own merchant account.