A merchant account is crucial to any business. It allows the business to make transactions with bank cards and electronic funds as a form of payment. These accounts are usually linked to a standard business checking account or direct deposit account and funds can be directed straight into this account. However they must first go through an automated clearing house, which is determined by which bank the business is using for its accounts.
Risk is always a factor when it comes to business decisions and there is some risk to merchant accounts, as with any other financial service a business could employ. With these types of accounts, the bank receiving the funds must assume the business has delivered the service or product they promised. This assumption is what in turn allows the bank to release the business funds.
It is therefore crucial that a business understands the risk involved in credit card transactions. Credit card processors are cautious about doling out merchant accounts and correspondingly they closely monitor how the accounts are used.
A low risk account is for businesses that have proven themselves trustworthy. A high risk account would be one for a merchant who has recently been terminated or declined, who provides adult only content on the internet or who needs offshore services for some reason. Low and high risk are not the only two distinctions though. There is a range of lower or higher risk within this spectrum that will determine your specific rate for your new account.
Businesses need to apply for a low risk account and they have to pass certain strict criteria in order to be deemed low risk. Depending on the answers you provide to the forms required for a low risk account, you will be given a higher or lower quote for the account costs to your business. The less risk you present, the better off you will be, both in terms of cost and in terms of just qualifying for a low risk account at all.
Among the information businesses need to provide in order to secure a low risk account is the rates and fees they levy. Technology is another item that will have a bearing upon your eligibility for the account. For example you may need new or different software and equipment in order to process credit, debit and ATM cards. It is important to know what new technology you will need while you apply, as this could have an effect on what your rate ends up being.
Getting a low risk merchant account can require a lot of time and patience on the part of the applicant, however, it is a process well worth the effort. With the popularity of debit cards and credit cards still growing, fewer and fewer consumers these days are using cash to pay for their purchases. It is becoming crucial that businesses offer the option of paying with plastic. Otherwise, they could lose customers to other businesses that do provide that option.