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October 17, 2007

A Beginner’s Guide To Online Merchant Accounts

It’s probably one of the most misunderstood aspects of Internet business. While others make it seem so scary, truly, there’s nothing to fear. Getting an online merchant account can be one of the easiest steps in setting up your ecommerce business, if you know what to look for and what to avoid.

It used to be – in order to get a merchant account – you had to fill out mounds of paperwork at a stodgy old bank, then try and convince the branch manager that small businesses deserved merchant accounts, too. If you were an Internet-based business, the uphill battle was even steeper. Today, however, site owners have many other options including merchant account providers, independent sales organizations and more. Because the marketplace has opened so widely, getting an online merchant account is quite a simple process.


Tip: You should never pay an application fee.

This is an old-school practice many institutions used to use to bring in a little extra cash. While applying for an online merchant account these days still requires an application to be completed, account providers stopped charging application fees long ago.

You’ll be expected to provide the basic information (company name, principle’s name, address, phone, fax, type of ownership, website address, etc.). You may also be asked for information such as estimated average credit card transaction, estimated monthly sales volume, federal tax ID number or Social Security number, bank account number, routing number and other financial information. This is typical in order to allow the online merchant account provider to assess your qualification for the service, and to determine your credit rating.

Warning: Never fill out an unsecured online application. Look in the address bar for a URL that begins with https:// to be sure your information remains safe.


Tip: Calculate a set number of fictitious monthly charges (for example, 50 charges at $55.00 each) using the fees each merchant account provider you’re considering charges. This way you can compare apples to apples.

Merchant account providers make money by charging for the use of the service. Certain flat and percentage-based fees are imposed on everyone who transacts business via credit card online. Let’s look at the fees you can expect and find out what each one represents.

  1. Discount Rate – The percentage of each sale due to the merchant account provider.
  2. Transaction Fee – A flat-rate amount charged for each transaction you process.
  3. Statement Fee – A flat-rate amount charge for generating monthly statements of your account.
  4. Monthly Minimum – A fee collected if your monthly sales don’t exceed this amount.
  5. Annual Fee – As the name implies, this fee is charged annually for use of the online merchant account.
  6. Set Up Fee – A flat-rate fee charged for setting up your new merchant account.

Warning: Many merchant account providers require no contract at all. Others offer discounts for committing to a long-term contract. If the provider you’re applying with requires a lengthy contract without offering a discount, reconsider.


Watch for flexibility in online merchant account providers. You’ll want to work with someone who allows you to use their shopping cart or your own or to use their Internet gateway or your own. Being forced into using everything the provider offers can get complicated and expensive. The same goes for flexibility in service. You want a merchant account provider who will be there if you have questions or need advice.


Once your application has been approved, you’ll be ready to accept credit cards online! Your customers can process their orders via your site and make purchases immediately. How does it work? Once the customer enters their credit card information, that data is whisked over to the processing center.

The processing center requests authorization from the issuing bank of the credit card. When everything is approved, the sale goes through. It all happens in real time at the blink of an eye!

Just remember:

  1. never pay an application fee
  2. make sure online merchant account applications are secure
  3. use a set number of sample transactions to compare various merchant providers
  4. look for flexibility

Before you know it, you’ll be raking in sale after sale on your website thanks to the benefits of online merchant accounts.

Author:  Lena Crossan is Marketing Manager of that has offered affordable award-winning ecommerce services since 1995. Discover their proven, innovative online merchant account and other solutions today at