"Card not present" merchant account
In a brick-and-mortar type store, you present your card to the cashier, who swipes it through a card reader or takes an impression of it. With an ecommerce merchant account, you cannot physically see the card you are charging, so you need a special kind of merchant account called a "card not present" account. An internet merchant account will typically ask the customer to know the billing address and/or the security code on the card. This helps prevent fraudulent use of credit cards online.
Discount rates and your merchant account
Merchant accounts typically charge a discount rate, a percentage of the selling price. That's how they make their money. Remember to price your goods accordingly, as you will only be collecting the sale price less the discount rate. You want to shop around and find an internet merchant account with the lowest discount rate, so each sale will cost you less money. An online merchant account has a higher risk of fraudulent credit card use so will typically charge a higher discount rate to cover their risk.
If I already have a merchant account for my store, why do I need an internet merchant account?
In your store, you can swipe the credit card through a card reader, compare a customer's signature to that on the back of the card, and with newer cards even see a picture of your customer. All this helps eliminate fraudulent use of credit cards. For an ecommerce merchant account, additional steps are taken to ensure that the card is not stolen and this special type of account is called a "card not present" merchant account. This might include comparing billing and shipping addresses or having the customer enter the security code on the back of the card. Your internet merchant account helps ensure that you will collect the payment, as promised, and not be out both your goods and the money. Processing is done in real time, as the order is being made, so you don't have to wait and batch process payments.
If I take credit card payments online, can I take them in person as well?
Yes. Most merchant accounts have a means of entering credit card information manually so you can process in-person or telephone orders in addition to online orders. Your internet merchant account might also an option to let you process orders over the telephone and include the options of recurring payments, in case you are selling something for a monthly fee.
Credit cards and your internet merchant account
Taking credit cards makes your internet store appear professional and inspires confidence. It also means you can collect money from international customers as easily as those in your home town. For your small business merchant accounts to work with your internet store, you will need a "card not present" merchant account, which offers extra security to make sure you can collect your money. You want to make it as easy as possible for people to buy from you, quickly and easily. If the process is too complicated or if people think they'll wait too long by mailing you a check, you will have lost the sale. You will most likely make up for the transaction fees by making more sales, as your online merchant account lets you quickly process your customers credit cards and fulfill the order rapidly.
Understanding your merchant account
Merchant accounts are basically bank accounts that allow you to accept credit card payments. You can set up a merchant account on your own or as part of your shopping cart software. If you don't want to accept credit cards online, you can ask people to pay by check or something like PayPal. If you do set up an online merchant account, you'll typically pay a fee per transaction and a percentage of the amount charged. Some merchant accounts charge you a monthly fee even if you have no sales that month so make sure you understand the details of your internet merchant account before you commit to paying more than you can afford.