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Types of Merchant Accounts

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Types of Merchant Accounts

Based on your business type and size, you can choose from a variety of merchant accounts. These merchant accounts enable you to accept credit cards or electronic checks through various channels such as storefront, credit card terminal, on the Internet, via online credit card processing or on the telephone. Rates and fees may vary from firm to firm but are generally determined on business model classification. The most common types of merchant accounts are-

  • Internet Merchant Accounts - This account is used for transactions over the Internet i.e. for business owners who have services or products advertised, marketed and sold online. This account enables you to accept credit cards over the Internet. Your basic requirements in this include a payment gateway or virtual terminal and an account processor to process your credit card transactions.
  • Retail Merchant Accounts – A retail merchant account enables you to use a credit card-processing machine. Credit cards of customers can be inspected, swiped and signatures can be matched before you accept payments. This type of account offers minimum scope for fraudulent payments since the credit card and details can be visually inspected.
  • Mail or Telephone Order - Many business owners also offer the choice of placing orders by phone or mail. Although this often means higher risk of fraudulent activities, this kind of arrangement works best with restaurants and other service providers.

Apart from the aforesaid basic types, some firms also provide additional offshore merchant account (for a business spread globally) and high-risk merchant account (for businesses dealing in high value products) among many others. The kind of account you choose will largely depend on whether you sell products or services, have a global business or a small business, the risk you are willing to take as regards accepting payments and the budget that you can keep aside for the merchant account services fees/surcharges.

If you have a business spread over a large area and conduct most of your sales online, an Internet account can prove to be very useful, since it allows you to accept payments easily and fast. It also offers convenience to your customers. A little risk is involved here however, since physical checking of the credit card or the magnetic strip is not possible. If you want to steer clear of any fraudulent payments, the best option is the retail merchant account, which enables inspection of the customer’s credit card, and matching of signatures before accepting payments. Whichever is your choice, ensure that it suits your business needs and contributes to your growth.


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