Why a Paid Online Merchant Account is Better Than a Free Merchant Account?
An online merchant account is a specialized account with the bank that allows the merchant to accept online transactions using a credit or debit card. With several merchants opting for online businesses, presence of an online merchant account is fast becoming a necessity.
One important factor that determines the selection of a merchant service provider is the cost associated with a merchant account. These costs tend to differ from provider to provider and are usually high. Hence, many online business firms tend to be apprehensive about these accounts. In order to increase their business, merchant service providers or banks are always coming up with innovative business strategies. One such strategy is offering free merchant accounts. In this context, it is important to understand the differences between a paid merchant account and a free merchant.
A free merchant account is one where the merchant service provider doesn’t collect any membership charges from the merchant nor charge any setup fees. This means that the merchant need not pay anything in order to register with the merchant provider and receives the necessary payment gateway information and setup guide free of cost. Many merchants tend to have an impression that free merchant accounts are much better than a paid one. However, these accounts have their own set of advantages and disadvantages. It is important to know about these before opting for a free account or a paid account.
In this world, nothing comes for free. If one is underpaying for something that needs to be compensated by overpaying for something else. The same is happening with free accounts. The only advantage of a free account is that the merchant gets the account without paying a single penny. However, the disadvantages are many. These include higher processing rates and chargeback rates that can cost much more than the costs incurred on a paid account. These high rates are charged by service providers so as to compensate the money lost due to free registration process.
One can easily determine the difference in charges by doing a simple comparison. For example, assume that the average costs on a free account levied by a merchant service provider for every online transaction is equal to $1.00 + 5% of the entire transaction amount. This means that if a customer has purchased an item worth $100, then the same is paid by the customer. However, the merchant doesn’t receive the entire amount. The service provider deducts the costs and deposits the remaining amount in the merchant’s account. Hence, for every $100 transaction, the merchant has to lose $6 towards charges. As a result, he/she will get only $94 (5% of transaction amount=$5.00 + $1.00=$6.00). In reality, service providers have been known to even charge rates as high as $14 on free accounts. In contrast, charges on a commercial or paid account are much less. As a result, greater savings and higher profits seem to be possible through a paid account.
Another major disadvantage of a free account is lack of technical and customer service from the service provider. As a result, merchants have to compromise on the security and stability of the payment gateway and the transaction.
On the contrary, a paid account has all the advantages including lower processing rates and providing secured transaction gateways to the customers. Also, banks tend to offer rewards on transactions where paid accounts are being used. Free accounts usually don’t have any such offers.
Hence, one should choose an online merchant account depending on the requirements and needs of the business firm.
How do I know if funds have been deposited into my merchant account?
How do I know if funds have been deposited into my merchant account? and can you refer merchant account providers(ehem free would be great!) that can deposit funds at the shortest time possible?
Whenever you process a sale and get an approval you can expect the funds to be deposited into the bank account you specified in the application you completed within two business days of batching out your terminal for Visa and MasterCard. American Express and Discover Card can take up three days to fund.
Now some banks have a special relationship with some processing banks and in those cases you can receive your funds within one business day. If the bank you have your bank account through has a relationship with your processing bank you may be able to get your funds this fast. You will need to ask the merchant account provider if this applies to your bank.
If a processing bank takes more then two days to deposit your funds you might want to consider moving to a new processor. Although delays in funding do happen they are rare and should not occur regularly.
To verify you have received your funds simply login into your bank account through their website, or even go in and pay them a visit, to see if a deposit has been made.
Paypal – Which type of account for receiving money from abroad?
My friend owes me some money from a holiday. I suggested that they pay me via my paypal account rather than sorting out international money orders. But, will I get charged a fee from
Paypal to receive this?
Also, do different types of account have different fees?
I have a merchant account, but my boyfriend has a personal account.
Also, I notice on paypal you can request money as a service, I suppose this is what it is, but what are the fees?
I’ve found the paypal help pages very confusing, and don’t want to go down this route if it’s going to cost loads.
Thanks for any answers
Erm no you dont need a specific tyoe of account. Just have Paypal account and you send and receive money from ALL OVER THE WORLD.
The way it works is that when you receie money, the buyer converts the money say into pounds in theyre from USA. Thats how it works – over the net so no need for special account!
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