Opening a Merchant Account
16 Jun 2010 • 04:10 AM • BusinessThe account held by businesses to be able to accept payments from credit cards and debit cards is known as a Merchant Account. Since businesses are entering the virtual world at a rapid rate, maintaining a merchant account is now being considered a strategic necessity to cope with the changing business environment.
But opening a merchant account isn’t very straightforward, and it comes with its share of disadvantages. A business has to meet certain requirements set by banks before opening a merchant account. Further, these requirements vary from country to country. Also the time taken to secure an approval can vary from a day to several days.
Even when the setting up process is successful, there are a few other disadvantages. With a merchants account, the business is solely responsible for processing the credit/debit card information; hence the risk is much higher than that of using third party merchants. Also the initial fee for opening a merchant account is usually higher than that of using a third party account. Hence if there are only few transactions made using the debit/credit cards, it doesn’t make strategic sense to open a merchant account.
Despite these disadvantages, merchant accounts are becoming extremely popular. The reason being the many advantages it offers. Though the initial fee for opening the account is high, the per transaction cost using ones own merchant account is significantly lower. Also it gives the consumers the impression that the business is much more professional, and is evolving with times. So if a large proportion of the payments are made using debit/credit cards it certainly makes sense to bear the initial costs and open a merchant account.
Hence a merchant account comes with its share of pros and cons, and it is essential to balance those before taking a plunge into opening one.
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