As a business owner, you know that accepting credit and debit cards is essential to keeping your doors open. But what you may not know is that there are a variety of merchant services providers out there vying for your business.
To help you sort through the options and find the best provider for your needs, we’ve put together this comprehensive guide. In it, we’ll cover everything from the basics of merchant services to the different types of providers and what they offer.
We’ll also provide a few tips on how to save money on your processing fees and avoid common pitfalls that can cost you dearly. So whether you’re a seasoned pro or just getting started, this guide will give you the information you need to make the best decision for your business.
What are merchant services?
Merchant services are simply the credit and debit card processing services that allow businesses to accept payments from their customers. This can be done in person, online, or over the phone.
In order to accept credit and debit card payments, businesses need to have a merchant account. This is a special type of bank account that allows businesses to process credit and debit card transactions.
Merchant accounts are usually set up through banks or other financial institutions, but there are also some merchant service providers that offer them directly to businesses.
In addition to a merchant account, businesses will also need a credit card processor. This is the company that actually processes the credit and debit card transactions for the business.
There are two main types of processors: third-party processors and direct processors. Third-party processors are usually banks or other financial institutions that act as middlemen between businesses and direct processors. Direct processors are the companies that actually process the credit and debit card transactions.
Businesses will also need a payment gateway. This is a software application that allows businesses to accept and process credit and debit card payments online. Payment gateways encrypt credit and debit card information to ensure that it is secure when it is transmitted over the internet.
Most merchant service providers will offer all of the above services, as well as a few additional ones. These may include things like fraud protection, point-of-sale (POS) systems, and gift card programs.
What are the different types of merchant service providers?
There are four main types of merchant service providers: banks, independent sales organizations (ISOs), membership organizations, and direct processors.
- Banks: Banks are the most common type of merchant service provider. They usually offer a full suite of services, including merchant accounts, credit card processing, payment gateways, and POS systems.
- Independent sales organizations (ISOs): ISOs are companies that sell merchant services on behalf of banks or other financial institutions. They usually focus on a specific type of merchant, such as restaurants or retail stores.
- Membership organizations: Membership organizations are usually trade associations or other groups that represent businesses in a specific industry. They sometimes offer merchant services to their members, but they may also refer them to other providers.
- Direct processors: Direct processors are companies that provide credit card processing services directly to businesses. They usually don’t offer other types of merchant services, such as merchant accounts or payment gateways.
What are the benefits of using merchant services?
There are a few key benefits that come with using merchant services. These include:
- Convenience: Merchant services make it easy for businesses to accept credit and debit card payments from their customers. This can be done in person, online, or over the phone.
- Flexibility: Merchant services give businesses the ability to accept a wide range of payment types, including credit and debit cards, e-checks, and gift cards.
- Security: Merchant services use encryption and other security measures to protect businesses from fraud and data breaches.
- Cost savings: Merchant services can save businesses money by reducing the need for paper checks and other forms of payment.
What are the risks of using merchant services?
There are a few key risks that come with using merchant services. These include:
- Fraud: Fraudulent charges can be made to a business’s merchant account if the account is not properly secured.
- Data breaches: Merchant accounts can be hacked, and customer information can be stolen. This can lead to a loss of money for the business, as well as damage to its reputation.
- Contracts: Merchant service contracts can be complex, and they may include hidden fees or other terms that are unfavorable to the business.
How can businesses choose the right merchant service provider?
There are a few things that businesses should keep in mind when choosing a merchant service provider. These include:
- Cost: Businesses should compare the costs of different merchant service providers, including monthly fees, transaction fees, and equipment costs.
- Services: Businesses should make sure that the merchant service provider offers all of the services that they need, such as credit card processing, payment gateway, and POS system.
- Contract: Businesses should carefully review the contract before signing up for merchant services. They should look for hidden fees, early termination penalties, and other unfavorable terms.
- Reputation: Businesses should research the reputation of the merchant service provider, and make sure that they have a good history with their customers.