A merchant account is the kind of bank account that let’s a business accept card payments. A merchant account allows an offline business to accept payments with a card machine, while an online business makes use of a payment gateway which is set up using their website to process payments. Having a merchant account for an offline business is indeed a huge step. You need to understand that a merchant account needs a contractual and financial commitment to a merchant service provider. There are a number of significant costs to set up a merchant account.

The costs include; the minimum monthly service charge, cost per transaction and statement charges. There may be charges associated with cancelling the account. To enter into a merchant account agreement, a business needs to be very sure it can process a significant number of card payments. If not the business may still have to pay the minimum monthly service charge each month. If the business is not gaining significant additional revenue by offering card payments they will end up losing money. To so many businesses, a merchant account is advisable and needed, but for some small businesses and the self employed, a traditional merchant account can be a bad road.

Advancement in modern technology has given businesses that can’t afford a merchant account a platform to still accept credit card payments online. A third party merchant service will allow you not only the ability to accept credit cards online, but will also help you to avoid paying for special software, application fees, setup fees, monthly fees, gateway fees, a secure server, or even minimum transaction fees. Note that most third party processing services ask for a percentage of your transactions, and this percentage can be four times the amount it would be if you had your own merchant account. But it gives you the opportunity to owe nothing if you sell nothing.

It is advisable that you weigh your options and cost before deciding the path to follow. For some businesses, having their own merchant account is the obvious choice. For others, a third party processing service is best.

Basic Steps to Accepting Credit Card Payments Without a Merchant Account

1. Know the job of a third party merchant

You need to understand that a third party merchant is a business that accepts credit card payments on your behalf for a processing fee. They will have to check the card, process it, and send you a monthly payment for the amount you are owed. Have it in mind that the merchant does most of the work for you, giving you the chance to focus on growing your products, services and all other aspects of your business. Also using a reputable third party merchant will help you build your brand, as your customers will most likely buy your product if they are sure their credit card information will be secure and safe.

2. Understand the benefits and pitfalls of using this service

Using a third party merchant is not ideal for all kinds of businesses, due to its pros and cons. A lot of small businesses who process less than $1000 in transactions a month and want to run an online payment platform as well as international sales will have to go with a third party merchant. Note that the major advantage of a third party merchant is that a lot of them do not require credit checks, making them very appealing to businesses with low credit scores or poor credit histories. But merchants charge a higher percentage for each transaction than if you have your own merchant account. This is why it is advisable that you view third party merchants as a stepping stone for your business to help you get started and set up.

3. Research top third party merchants

Have it in mind there are a lot of third party merchants in the world today, and some are more used than others. It is very advisable that you research several merchants to find the one that suits your business visions and goals. Note that some of these merchants allow you to sell products in person to customers at a brick-and-mortar location and online through an online store. You also need to evaluate at least two to three different third party merchants to find out which merchant suits your plans. You can start by looking at the start up fees the merchant charges for use of their service. Most of the popular third party merchants such as PayPal or Square, have no setup fees. Some third party merchants charge a very small setup fee, around $40-$50.

4. Compare transaction fees and check the reserve percentage

It’s very important to state that transaction fees are the fees charged for each completed transaction. Research has shown that some third party merchants will take a low percentage of the total transaction amount as their transaction fee, while some third party merchants also have a low per-transaction fee that is charged on top of the percentage fee. You need to carefully analyse the transaction fees for each third party merchant and decide which one is affordable. Also some third party merchants will put a temporary hold on 5-10% of your transaction revenue. It is usually to safeguard against any returned items or charge backs due to the reversal of a charge or a transaction. It is advisable that you ask the third party merchant about their reserve percentage, if any. You may want a third party merchant that does not require a reserve percentage so you have access to your total transaction revenue at all times.

5. Analyse the mode of payment

You need to understand that most merchants will accept payments through in-person transactions and online transactions, while some will also process transactions over the phone, by fax, or by mail. To avoid misconceptions and making the wrong choice, you need to ask and understand the various payment methods the merchant accepts. Have it in mind that some credit card networks may charge higher fees than others, even when processed through the same third party merchant. Some merchants may also access checks by phone, where the customer takes a picture of a check on their phone and it is processed through their bank’s app as a form of payment.

6. Find out all restrictions or limitations

Third -party merchants are meant to list any restrictions or limitations up front. There may be restrictions on whether the merchant will handle only “tangible,” or physical, products. These limitations maybe how much money you can process through the service: you may be limited to a minimum amount and a maximum amount each month. Also note that some merchants can handle both tangible products and intangible products, as well as online products and services. You just have to ensure that the restrictions and limitations doesn’t hinder your business plans and goals.

Well known Third party Merchants

Setting up a merchant account is indeed expensive and can be a daunting process for a lot of sellers, service providers, and other small businesses. But third party payment gateways have made things more easier and now businesses and individuals that don’t have merchant accounts can still accept and process credit card payments. Below are well known third party merchants:

PayPal
It is one of most popular third party payment processors and it offers three ways to process credit cards. Note that processing fees depend on the level of service you select and run, but it is typically $0.30 per transaction and up, plus 1.9 to 2.9 percent of the transaction amount. Sales volume also affects what you pay.

2Checkout
2Checkout boasts of an A+ rating with the Better Business Bureau (BBB), and customer comments are generally positive. It is also known for its free and easy account sign up procedures. Other benefits include:
• Recurring billing allows you to auto-bill your customers for subscriptions or ongoing service.
• Gives you the opportunity to offer 25 currency payment options to your customers, allowing you to sell globally.
• Flat-rate pricing is simple and easy to understand.
• 2Checkout helps build brand loyalty, by featuring your brand throughout the checkout process, rather than their own.

GoPayment from Intuit
It remains one of the favourite for business owners who work tradeshows, sell from mall kiosks, or need to process swiped transactions wherever the customer and her credit card are present. GoPayment service process includes:
• Ensure you have a compatible mobile device
• Get the free app, and receive your free card reader.
• Upload your logo and contact information to the app.
• Plug the reader into your headphone jack, and you are good to go.

ProPay
This service provider is very popular among businesses that have conducted thorough research and are searching for a highly rated payment gateway. ProPay has an A+ rating from the BBB, and is certified by TRUSTe. Propay features include:
• Process transactions on mobile devices using the JAK card reader.
• Customers can also pay using a touch-tone phone to enter their credit card numbers.
• Save credit card information for recurring billings on subscriptions and other ongoing services.
• Online sign-up is easy.
• The fee for swiped card transactions is 2.6 percent, and the fee for transactions where a credit card number is keyed in is 3.4 percent.

Conclusion
To be able to accept credit card payments anytime and anywhere in the world is becoming a necessity for businesses. Paying for products or services by credit or debit card is rapidly becoming the preferred method of payment. Sometimes, merchants are able to swipe cards for immediate electronic processing, but in some cases this may not be an option. Manual credit card processing is done by taking an imprint of a customer’s credit card, or by taking down the customer’s card information, and processing the credit card later by phone or Internet. Accepting credit cards, whether online or off, used to be a convenience that not all businesses could afford. Cash and checks were the most often used way to pay for things. For businesses to survive, accepting credit cards is a must.

Agreeably, getting a merchant account can be very expensive, and it is subject to the vendor having excellent credit and a reasonably long-standing relationship with a bank. There are also various transaction fees, equipment purchase or lease costs and set-up fees to take into consideration. But these days, having a merchant account is no longer the only option for a business just starting out. Credit cards can be accepted through a number of services without requiring a merchant account. But you have to carefully examine your short term and long term goals. Do not just jump into any process without proper consideration.

Ajaero Tony Martins