Merchant Services and their Role in Retail Business

To merchant service providers, a "retail" merchant account is defined as one required any time you are physically handling a credit card in some kind of face-to-face transaction; this could be a local shop, restaurant or kiosk. "Face-to-face" transactions are considered lower risk accounts and are usually easier to set up and establish than their online counterparts.

According to the United States Census Bureau, in 2004, there were more 25 million small businesses in the United States that employ less than 100 people. In today's market it doesn't matter what your business is; whether online or face-to-face, you need to have the ability to take credit and debit cards.

Arguably, an online merchant account is more complicated than a retail merchant account; however, retailers need to utilize credit card business just as much as their online counterparts. There is no denying that your storefront retail business can be seriously damaged or improved contingent simply on whether you accept credit or debit cards. This is where you'll need merchant services and a merchant account.

Here are some of the technical hurdles and fees you will encounter when researching a merchant service or setting up a merchant account.

Credit Card Reader Terminal

Choosing a credit card terminal is like choosing a new cell phone, there are a number of choices and the device you decide on depends on your business. Restaurants usually prefer something that generates a receipt; mall kiosks usually prefer wireless readers, gas stations sometimes just have POS stations or pin pads, and so on. The price of credit card readers can range from $100 to $600, and sometimes more. However, most merchant services will give you a discount or free credit card reader when you create a merchant account with them.

Retail Merchant Service Fees

Typical merchant fees include a discount rate, transaction fee, statement fee and monthly minimum. Traditionally, retail merchant accounts have lesser fees because the merchant and the customer are together in the transaction. Merchant services feel this is a "low risk" transaction because you can check ID or formally verify an address. However, your "risk" assessment also depends on your merchandise. The more expensive your goods, the higher risk you become. This is also true for high volume retailers.

The average discount rate for a retail business is between 1% and 2%, again your rate will vary depending on your risk assessment. Transaction fees are usually in the $.20 to $.25 range.

Sometimes the transaction fees are different too, but they usually hover in $.20 to $.25 range. A typical statement fee is about $10 a month and monthly minimums are about $20. The best merchant services will offer competitive pricing and fees across the board.

Payment Gateway

Unlike online businesses, retail stores don't need payment gateways. The card reader or point-of-sale terminal acts as the gateway linking directly from your business to the credit card holder's bank.

Don't let the technical details hold you back from opening your dream business. It sounds more complicated than it really is. Even if you are not technically inclined a great merchant service, with strong technical support will do all the leg work for you and walk you through every step of the way.