Merchant Accounts 101

Everything You Need to Know to About Merchant Accounts

 

Author: Jim Conners

Rating: 10.0

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Payment

Naturally an important aspect of accepting credit cards is how fast you get your money from your credit card sales. Merchant account providers typically provide funds within two business days of when a batch is settled. This means if you process a sale on a Monday and settle your terminal that night, you will receive your funds that Wednesday. Weekends and Holidays do not count as business days so if a batch is settled on a Thursday night the funds from those transactions will not be available to the merchant until the following Monday.

It is possible to have your funds deposited into your business account with 24 hours of settling a batch. For this to occur the process bank must have a direct relationship with the bank you have your checking account through. And example of this is merchants who have a merchant account through Nova Information Systems and a checking account through Regions Bank will receive their funds in one business day due to the direct relationship that Regions Bank has with Nova.

An overlooked but important feature to note when selecting a merchant account provider is how your funds are deposited and your fees are subtracted. Ideally when you receive your funds you will receive the the full amount of the deposit without any fees due being taken out. The advantage to this is it allows bookkeeping to be greatly simplified. If you have a batch of $500 settled on Monday, you can expect to see a deposit of $500 on Wednesday. No need to guess what fees were taken and if there are any problems you can spot them quickly. The fees for your transactions will be deducted at the beginning of the following month at one time. Shortly thereafter you will receive a statement that will detail your transactions and subsequent fees.

Getting Started

Once you have established your merchant account you still have responsibilities. Those responsibilities can be easily managed once you have an understanding of what they are and experience handling them. But for a new merchant they are probably at their most critical point and are outlined below:

1. Do a test transaction

   Run a transaction through your credit card terminal for $1.00. Ideally you can a test credit card number provided by your merchant account provider but using a real credit card is just as good. The goal is to verify that everything is programmed properly into your credit card terminal and that a transaction will run smoothly from start to finish.

2. Verify deposit of funds

   After running a "live" transaction check the bank account you associated your merchant account with to make sure those funds have been deposited into that account. There are two things to keep in mind when verifying your deposits:

   1. It takes two business days for Visa and MasterCard transactions to be deposited and up to three days for Discover Card and American Express
   
   
   2. The amount deposited should be the the same as your previous batch's total. However this may not be the case if you are having funds held for a reserve or have a merchant account where your fees are debited daily.
   
   
3. Check your statements

   As mentioned above there are many rates and fees you may be charged besides those quoted by your merchant account provider. In order to verify your quoted rates are corrected and see how often you are incurring surcharges and other fees you should review each and every processing statement. If you are making errors while processing this will be the fastest way to catch it and have it corrected. Also, if any errors were made by the processing bank or merchant account provider while establishing your account, it is better to catch it now then six months to a year later. Many processing banks have a policy of only refunding erroneous charges up until the next statement arrives. They then consider you satisfied with your statement and will not refund any fees you may have been entitled to.

4. Order supplies

   In general accepting credit cards does not require much in terms of physical equipment and supplies. Especially if you are an Internet or home based merchant. But if you are face-to-face with your customers, at the very least, you will want to provide them with a receipt of their purchase. There's nothing worse then finding out you've run out of receipt tape in the middle of a busy day. Ordering extra supplies is a good way to make sure you don't get caught off guard and can focus on processing your sales instead of figuring out how to get supplies in a hurry.

The good thing about merchant accounts is once they are up and running for a couple of months you don't really need to pay much attention to them as they don't require much maintenance. Once you have reviewed a couple of statements and verified that everything is in order it pretty much will be the same thing month after month. All you really need to do on an ongoing basis is review your monthly statements to look for potential processing mistakes on your part by finding surcharges that you don't normally see. Also, your processor will occasionally put important notices on your statements which you need to look out for.

Be sure to also read our blog posts New Merchants Part I: Check Your Statements and New Merchants Part II: Check Your Deposits Do A Test Transaction to learn more about getting started with your merchant account.

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