Credit cards, merchant accounts and your bottomline

Q: I am a gift-shop opening and credit cards can accept. I spoke with the Branch Manager at my Bank, but he is apparently not know much about how it all works. He said that I something called "a merchant account" and so-called "credit card processor." would otherwise have in addition he seemed as perplexed as I am. I am thinking of another bank is. Can you explain how that all works?
--Mary Ann G.

A: Maryann, I'm going to give your banker to the benefit of the doubt and say, that a lack of knowledge about the special features of the credit card processing, not necessarily a reflection of the competence the banker. Over the years, I've found that most, no matter how experienced or knowledgeable about the banking they my be, know not really really works bankers much about such as credit card processing and acceptance. This is because the task of accepting and check credit card purchases for a bank account process of third-party service companies, distributors and deposit funds (or rules) is handled.

Accept the decision, the credit card is a wise for all retailers. I agree with financial guru Dave Ramsey teachings regarding the use and misuse of credit cards. Many people digging deep holes with credit cards, hard to by climbing. But from a practical point of view, all retail business that takes no credit cards is leaving money on the table. Studies have shown that accepting credit cards increases sales and cash flow the money helps because you within up to one week for a check box, get clear a few days instead of waiting.

Credit cards not hopping, as have some testing to do a tendency. Credit card users are also more likely to buy impulsively and spend more than they do. Bad news for them, but good news for you. If you have a social conscience about the use of consumer credit cards, a retail operation is not the business for you probably.

Credit cards in a place generally four things you will need bricks and mortar. The requirements can vary a little, however, that is true in most cases. You will need: (1) a possibility of customer credit card information system establish a review and processing. This can be in one fell swoop terminal, time of sale system or be done by phone by calling the credit card; (2) To verify a gateway credit card company validity of credit card and payment process; (3) A credit card merchant account in which the gateway company on you made will deposit payments; and (4) A business bank account in which ultimately the sedentary funds will be deposited for your use.

Here is how the process works. (1) You make a sale and the customer pays by credit card. (2) With a card please swipe machine or telephone, which as a "Gateway" is known, please include the card information and takes checks whether the card is valid, and the case against the card account can be made. The gateway company returns an authorisation code for the purchase.

With a swipe machine or point of sale terminal is the review in a matter of seconds. If you do phone review it may take several minutes. Call the gateway company, fill in the credit card number and expiration date, and they give you a permission code you credit card free write on your betting slip. The money usually in your merchant account is either way, within 24-48 hours (less fees, course) deposited.

You must apply also dealer for status with each credit card company whose card you want to accept. Business with American Express and discover, all you have to do, fill out is an application, but you accept Visa and MasterCard have a merchant account. A merchant account is a special bank account for the express purpose accept payment by credit card by the firm gateway processes set up. Merchant accounts are usually in the context of banks, although you can use also merchant account service credit card companies, to perform the same function, if you can get approved for a bank account dealer.

The application for a merchant account with a bank is similar to apply for a loan. The only difference is sometimes to get a loan easier. It is the necessary formalities to complete and pledge followed by an approval process, up to several weeks can take that the firstborn. And you are not guaranteed that the Bank your merchant account will agree, even if you have a preferred customer for many years. Banks have strict rules in terms of merchant accounts and if exhibition a merchant account in the Bank at risk of losing money anyway represents you, you will be shot down. Banks decisions always based on economy, not relationships (regardless of what you says your banker).

Requirements for the qualification for a merchant account in banks is different, but in General, the Bank will look on the following criteria:

How long have you been in business? Business longevity is a history of stability, efficient management and good financial health.

What is your product or service? Borrow your product itself, a high rate of returns and chargebacks? A chargeback is a disputed credit card charge, which is refunded to the purchaser and to your account. You are a chargeback fee, can be as $20 per event. If your business lends itself to high chargebacks, you will receive not the merchant account.

How is your credit report? Banks always look at how much you debt and how you pay your bills, so it is important, good financial and trade references. If a history of late payments or defaults on accounts payable, will it count against you.

What is your expected volume of sales and average transaction amount? The more money you make, the more money makes the Bank. If you expect only a few credit card fees per week it may be not enough to justify the merchant account in the Bank eyes.

Your company will be classified as a "high risk merchant?". High risk merchants are those with the highest instances of credit card fraud and chargebacks. High risk merchants are many types of Internet-based companies, telemarketers, travel and cruise companies and membership clubs. High risk merchant is dramatically reduced the chances a merchant account with a bank.

High risk is not meant merchant that you have a merchant account from elsewhere can not get. By the growth of e-commerce are in the last few years a number of alternative companies, which you with a merchant account, sometimes with more perks than a traditional account, but almost always with higher fees.

In addition, not all banks support Internet merchant accounts. If you do not, on the one hand, that buy around.

Tim Knox, entrepreneur, author, speaker, radio host
Founder, who, so that it makes you your company begin Insiders Club today
www.theinsidersclub.com
Best selling author of: "All that I know as business I learned from my Mama"
www.timknox.com

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Posted in: Accounts,Bottomline,Cards,Credit,Merchant