Unlike certain clothes you buy, merchant accounts are not, “One size fits all” or “One type fits all”. The type of merchant account you’ll need for your business will depend on the type of industry and business model.
Some businesses actually need two merchant accounts. For example, if you run a brick and mortar retail store and sell products from that store through a mail order catalog; you will definitely need to have two separate merchant accounts – retail and mail order – to cover each division.
One merchant account will not do the job because of the different types of transactions you’ll be processing. Mail order sales shouldn’t be processed through a retail merchant account because they should be processed with a “card not present” merchant account. Retail sales should be processed with a “card present” merchant account. Switching the two will result in higher processing fees (mid-qualified or non-qualified discount rates).
Card Present Merchant Accounts
A “card present” merchant account is any merchant account in which the credit card and customer are present at the time the credit card is swiped through the terminal or magnetic card reader.
A wireless merchant account is a one that is used with a wireless credit card terminal. This type of account allows a merchant to accept credit cards on the go and obtain a real-time authorization for the transaction. Wireless accounts have low rates and fees like retail merchant accounts but the monthly fees are higher.
A retail merchant account is one where the majority of a merchant’s transactions are physically swiped through a credit card terminal that is connected to a land line phone. Retail merchant accounts have the lowest discount rates and transaction fees and are the most common type of merchant account.
Store and Forward
A store – and – forward merchant account is an account that allows a merchant to accept credit card transactions on the go and forward them to the processor at a later time. This type of account functions like a wireless merchant account in that it is battery powered. The difference is it doesn’t provide a real time authorization. It provides the same low rates and fees as a retail merchant account and is ideal for businesses that have small average tickets. Once a phone line is present, you can plug your terminal in and it will then forward the transaction information to the processor.
A restaurant merchant account functions differently from the other types of merchant accounts because of how tips are charged. Once the credit card is authorized then the grand total of the meal with gratuity plus any pre-meal spending on drinks or snacks.
Card Not Present Merchant Accounts
A “card not present” merchant account is one where neither the card nor the customer is present at the time of the transaction; such as mail order or telephone order. The credit card information is manually entered into the credit card terminal. These types of merchant accounts are high risk and are charged higher processing rates and fees.
Internet merchant accounts are used by businesses that sell products or services online and wish to accept real-time credit card payments. The majority of the sales are generated from a website.
Mail Order (Moto)
A mail order merchant account is one that is used by businesses that will be manually entering the majority of their credit card transactions on the keypad of a credit card terminal. Mail order businesses take credit card orders over the phone, by mail, or out in the field. They have the lowest processing rates and fees of all card not present merchant accounts.