When Do You Need a Merchant Account? By Amy Nut At Isnare.com Ezine Articles

Online business is growing in huge dimensions. People are beginning to catch up on the goldmine online and thus, movement into ecommerce isn't just happening in drove, it's doing so in legions. The reasons for this are of course obvious -the market, the global reach and the exploration of uncharted waters or more specifically, uncharted territories.

With the number of people going online, business can only get better and you can market to more people by the day. On the internet as in offline, you would need tools. Don't worry these are not physical tools. They are basically software and application that you would require to make the best out of your online business.

Setting up a website particularly one where you want to receive payments involve several things. One of these is a merchant account. For many online businesses, using a merchant account isn't exactly necessary. In case you are wondering what a merchant account is, it is simply put, a service provided by certain licensed companies to provide a bank account for an individual to accept payments online and offline. For instance, when you go to the hotel and ask them to charge your card, the money goes into their merchant account. Most offline companies have this in place already. Most major payment processors online use merchant accounts for their businesses and to accept payments from clients.

However, most small business owners online do not need any merchant account. There are already options for them in third-party payment processors such as clickbank, paypal and e-junkie. If your business isn't yet in the 7-figure a year range, then there is really no need acquiring a merchant account. You can use these third party payment processors who function as go-betweens. All you have to do is get registered with these companies and once people buy your products or services, they help you collect your money for a percentage of the total sale. The range of charges collected most times is often between 0.04% and 10%.

Now, you need your own merchant account when you need to process very large orders or when you want to be independent. Most offline companies are already doing this in the form of swipe card gadget. Merchant accounts aren't strictly limited to online businesses alone. Users can use the account to accept payments in their offline businesses too.

The reason many online business owners do not like or want to get a merchant account is the overhead involved and the cost of acquisition. If you own a merchant account, then it means you do not have to process it through anyone. You are responsible for refunds, chargebacks, payment processing and all the hassle that comes with it. But merchant accounts can be a big benefit if you have enough business volume coming in and do not want to pay the charges associated with using third party payment processors. For instance, if you have to pay 10% on each transaction and are taking in an order worth $1m, then you would have paid $100,000 in fees to the third party payment processor.

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