A merchant account is a type of bank account which allows a business to accept card payments. For an offline business a merchant account allows them to accept payments with a card machine. Online businesses use a payment gateway which is set up through their website to process payments.
For an offline business to set themselves up with a merchant account can be quite a big step. A merchant account requires a contractual and financial commitment to a merchant services provider. There are a number of significant costs to set up a merchant account for instance the account activation fee and the cost of card machine rental/ purchase. Ongoing costs include the minimum monthly service charge, cost per transaction and statement charges. There may be charges associate with cancelling the account.
To enter into a merchant account agreement a business must be fairly certain they will process a significant number of card payments. If not they will still face paying the minimum monthly service charge each month. If the business is not gaining significant additional revenue by offering card payments they will end up losing money. For many businesses a merchant account makes sense but for some small businesses and the self employed a traditional merchant account isn’t a viable option.
Previously, for those small businesses that could not justify investing in a merchant account, accepting card payments wasn’t an option. However, recent developments have led to the development of mobile card readers that work with a smartphone or tablet and don’t require a merchant account to be set up.
There are several companies in the UK offering this type of device. For details on all the companies please read an article I wrote about mobile card readers. Amongst the best options for small businesses and individuals at present are Payleven, and iZettle.
You can get a mobile chip and PIN device from Payleven or iZettle for £49/£59 in the UK. Transaction fees are 2.75% and the card readers work with iOS and Android devices (check for compatibility).
If a merchant account is not an option for you but you still want to accept card payments a mobile card reader might be worth investigating. It is worth baring in mind that the technology is brand new so there are some issues still being ironed out and the market is changing rapidly.
If you sell online an easy way to do so is with Paypal. Paypal easily integrates with your website, you can customise the landing page and Paypal is highly recognised and trusted by prospective customers. It is free to set up as a merchant through Paypal and the only fees you pay are on sales made. Paypal accepts card payments from all the major card companies and you can also connect Paypal with your bank account.
I hope you found this article useful. There are additional related articles on this website, take a look through the categories to find the relevant info.