How to Set Up a Business to Accept Credit Cards

What Does a Business Need to Process Credit and Debit Transactions?

Sep 22, 2009
Susan Brown

How to Set Up a Business to Accept Credit Cards - Andres Rueda

An explanation of merchant accounts and different credit card processing solutions to help the business owner decide the most effective way to accept credit payments.

Today, accepting credit card and debit card payments from customers has become a standard part of doing business. Even with all the brouhaha surrounding consumer debt, the fact remains that customers still appreciate the convenience and ease paying on credit (or debit) brings. It is thus vital that new business owners set up a suitable merchant account and credit card processing solution.

Opening Up a Merchant Account

A merchant account is a type of bank account into which all the money generated from credit card transactions is deposited. Most merchant account providers also offer merchants a range of services, such as credit card transaction processing or account balance and activity reporting.

There are basically two kinds of merchant account service providers: banks and independent service organizations. Banks are generally the more secure and reliable option, but it may be hard for many small businesses to be approved for such an account. Independent providers, on the other hand, tend to be more flexible and available, but they usually charge a hefty premium for their services.

Deciding Which Kind of Merchant Account to Open

Merchant accounts come in various forms. The choice of which one to open depends on the kind of business under consideration.

The first option is the standard, "brick and mortar" point-of-sale merchant account. These accounts are suitable for most retail businesses and they work with stand alone credit card terminals, software-based credit card processing (where merchants process credit card transactions right from their personal computers) as well as internet-based virtual terminals, such as AuthorizeNet.

The second option is an internet merchant account which is specifically designed to handle online payment processing of credit cards. This account is suitable for any business involved in e-commerce. Usually, the account fees with an internet merchant account are higher since there is a greater risk associated with on-line payment processing.

In addition to the Internet merchant account, any form of e-business must secure the services of a payment gateway like Authorize.net or Linkpoint and find a suitable shopping cart software program. A payment gateway operates like a stand alone credit card terminal, except it uses the Internet instead of a phone line to transmit the transaction information over the web. The shopping cart program will automatically connect the business' Web site to the payment gateway.

With a Mail Order/Phone Order (MOTO) merchant account, merchants can process credit card payments via mail or over the phone without having to physically swipe their customer’s credit card. A MOTO account is generally offered with either dial pay credit card processing (where businesses phone in their credit card transactions), a virtual terminal, or a stand alone terminal that comes with a key pad.

Deciding Which Credit Card Processing Solutions to Use

The following is a brief rundown of the major credit card processing solutions and the kinds of businesses they are meant for:

Stand alone terminal: A stand alone terminal is piece of equipment that captures a customer's credit card information and sends it to the credit card processing network. In addition to the credit card swiper, most terminals come with a key pad so that credit card information can be entered manually. This option is good for businesses that conduct MOTO as well as face-to-face sales transactions.
Web-based, virtual terminal: The virtual terminal is a secure, browser-based interface that will enable a business to authorize, process and manage credit card transactions from a web browser. The virtual terminal replaces stand alone terminals and credit card processing software. This is a good option for merchants who sell online and need real time, secure processing as well as merchants who manually enter credit card transactions for mail or phone order sales.
Software-based processing: Software-based credit card processing allows merchants to process credit card transactions right from their personal computers. A good software processing package can help reduce fraud, can save valuable time and money, and offers several powerful features that stand alone terminals cannot provide, such as detailed transaction records and reports. It is also easily upgradeable. Many of these packages can be used with an optional credit card swiper.
Dial pay credit card processing: Dial pay is an automated service that allows a business to process credit card transactions with out a terminal. Credit card transactions are phoned in via a 1-800 number from any mobile phone or land line. Dial pay is a good option for small business owners who want to accept credit cards without having to buy a terminal or pay gateway fees.
Wireless credit card processing: Mobile credit card terminals rely on wireless networks to transmit information. All transaction data is encrypted to prevent hackers from accessing sensitive information. It is the perfect credit card processing solution for retail businesses that need to operate on the go.