If you are starting a small business you will most likely be required to accept credit cards and to do this you will need a merchant account. A merchant account is a payment processing company or bank that lets your business accept credit cards.

Merchant account fees and charges depend on a number of factors; volume of transactions, the type of input device that is getting the credit card info (POS scanner in a grocery store versus someone typing in their credit card over the internet), the type of product or service you are providing, and the location of your business.

Generally, the riskier any of the aforementioned factors are (ie. if you are selling a high risk product or doing business from a high risk country) the larger your fees will be. To understand what merchant account(s) is(are) right for your business let us look at the 3 major types of merchant accounts and their applications.

Merchant Account #1 Retail

A retail merchant account is used in a “brick and mortar” business such as a grocery store or a drug store. They require you to have POS (Point of Sale) equipment for the customer to be able to swipe their card.  A merchant account requires that the majority of transactions are processed via a POS machine.

Merchant Account #2 MOTO (Mail Order Telephone Order)

This type of account is required if you are taking credit card payments via phone or by mail. These were designed mainly for mail order companies. They do not require equipment. Typical these systems have higher discount rate (a discount rate is the charge on purchase that customers card issuer takes from the sale of an item).

Merchant Account #3 Internet

This is type of account has become a very popular option for merchants and essential for anyone doing business online. These types of accounts process the credit card payments using a payment service gateway or shopping cart application.

So there are the 3 main types of merchant accounts. You can decide which account is best suited to your business. You may find that it is more than one.