I have a business checking account, and I have a paypal account, but I’m also wanting to get a gateway. I’ve heard about needing a merchant account as well, but is this in addiction to a checking account? If I do need a merchant account, what are the costs of getting one, and any recommendations as to where to get one?
Would this provide everything I needed? http://merchantaccounts.networksolutions.com/
The link you provided would do everything you need. The rates and fees are average so you won’t be getting screwed and the company is very large so you know they aren’t going to be going away any time soon. If you are looking for someone to do everything for you then this would be a wise choice.
If you wanted to see if you can do better, and that is possible, you can shop around and see what other companies have to offer. I’ve linked to a worksheet that will make comparing competitors easy for you do to as well as some educational material.
Look at the rates in that link you provided. Don’t even consider any rates higher then that. Try to make sure you do not get charged a monthly minimum fee and also do your best to find a month-to-month contract. You don’t want to get locked into a long term contract with a high cancellation fee.
Merchant account is the one the processes the credit card payments, not checking account. It is what you need to verify your customer’s credit card (whether it has sufficient funds, the number is valid, expiry date valid, etc). Once the credit card payment has been processed, then the money goes to your checking account. You need a merchant account for credit card payments.
Where to get merchant account?
- your bank (banks often give the best rates but difficult to get)
- stores such as Costco http://www.costco.com/Browse/Productgroup.aspx?Prodid=11105019&Ne=4000000&N=4018296&Mo=0&cm_re=1-_-Top_Right_Nav2-_-Top_services&No=0&Nr=P_CatalogName:BC&cat=55487&Ns=P_Price|1||P_SignDesc1&Sp=C
- third party merchant account provider — here’s a comparison table of merchant account http://www.infomerchant.net/merchantaccounts/comparison.html
You will have to carefully look at the costs. Some of the costs involved
- setup fees
- termination fees
- monthly fees
- transaction fees
- discount rate
- tech support fee
- statement fee
If you’re going to do ecommerce, you will need
- website
- shopping cart system
- SSL or secured server (https://)
- payment processing gateway such as Authorize.net
- merchant account
A merchant account is separate from a checking account (business or otherwise), as it’s sole purpose is to facilitate credit card payments through your business.
Most are setup so that they automatically transfer the funds to your business/checking account after the funds have "cleared" (usually 24 to 72 hours).
So you’ll need a merchant account of some kind if you wish to accept credit card payments directly, like through a gateway, for example.
The costs associated with getting a merchant account vary, but you’ll typically find that for online transactions, you’ll be paying anywhere from $19 – $59 per month in fees (or more), at about a 1.9% – 2.9% discount rate per sale, and often with around a $0.25 transaction fee on top of that.
In all honesty, however, the question you need to ask yourself is if it makes sense to get a merchant account YET…
There’s been some comparative studies done recently, which bring to the light that a merchant account for online transactions may not be worthwhile until sales reach a certain point, as PayPal has a fairly economical and global model.
Other potential "third party" (no application process, you don’t see CC details) merchant solutions for web transactions are 2CheckOut.com, Google Checkout, and Yahoo Stores.
What you’ll want to consider is whether the monthly fees, CANCELLATION PENALTIES, statement fees, transaction fees and minimum monthly account charges (regardless of activity) that you’ll have to deal with in using a "real" merchant account is worth the small difference in discount rate on each sale, as PayPal’s might be slightly higher.
Now, other factors include what you’re selling (the type of the transaction), the average ticket-size, sales volume, your credit rating, where your business is located, and your target market.
In some cases, it will make more sense to get a "real" merchant account even if your sales volume is fairly low. This could be due to using recurring billing for subscriptions, or if your products are also being sold locally, offline.
The bottom line is that it depends on your type of business, and your needs.
I’ve listed two articles below for your reference. The first one is a "self-diagnostic" test to see if it makes sense for your business to accept credit cards or not.
The second article crunches some numbers and shows the actual comparison between 3rd-party solutions like PayPal, and "real" merchant accounts.
I hope this answer will help you with a) determining whether applying for a merchant account is neccessary, and b) choosing a merchant account (or alternative) that specifically fits your business economically.