An Explanation of 3 Different Types of Merchant Accounts


If you have a business, chances are that you have had customers ask about using a credit card. As of 2017, only about 12 percent of consumers stated that they prefer to use cash rather than a debit or credit card. Whether you make sales primarily online or you have a storefront, you may have lost business because you could only accept cash or checks.

Your next step in building your business is to set up a merchant account, thus allowing you to accept cards for payment. There are several types of merchant accounts. Each of these is set up specifically for different situations, so you need to know which type you need before you move forward.

Internet or E-commerce Merchant Accounts

Many business owners today do not have a physical store; they only sell their products or services online. Even if you have both a storefront and an online store, you need a merchant account that is designed for online payments. You can open an internet merchant account online with the merchant bank. When your customers make purchases through your shopping cart, they use a secure web page to enter any credit card information, and the merchant bank runs the card.

While transaction fees are usually higher on this type of merchant account, there are some advantages for you. Some consumers prefer to buy online, so you may see more sales if you have an online presence. You can also create and manage recurring payments for your products and services and run detailed reports on purchases.

Mobile Merchant Accounts

In the same way that businesses are online, some businesses are also mobile. If you offer a service where you travel to the customer, such as painting or catering, you probably want to take payments using a card reader on your phone. This type of merchant account works similarly to a traditional one, but you swipe or insert the card on a reader plugged into your phone, and the app connects through your phone’s service provider to conduct the transaction.

As with internet merchant accounts, mobile merchant accounts may have higher fees, but they allow your customer to easily make a payment right then. Most mobile merchant banks offer the card reader for free or at a low cost, and there are usually no other upfront costs.

Retail Merchant Accounts


Image via Flickr by Håkan Dahlström

If you have a physical store, you will want to look into a retail merchant account. These accounts have traditional card reader terminals, usually linked to your cash register, and you or the customer can swipe or insert the card to complete the transaction.

Retail merchant accounts usually have lower fees than the other accounts. However, retail merchant banks have other requirements, such as a certain percentage of store sales must go through the terminal, and the customer must physically have the card in order to use it.

Setting up a Merchant Account

Once you know what type of account you need, you should then find a merchant bank and set up a merchant account. Remember – once you can accept credit and debit cards, you can usually run a better and more profitable business. You can not only avoid bad checks, but you can streamline your transactions and manage more money more effectively.