How to Get the Most Out of Your Merchant Account

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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An overwhelming amount of consumers use a form of electronic payment — whether it is credit cards or debit cards — to purchase goods and services. Surveys placed by Experian indicate that only 13% of households do not have a credit card and more than half of households in the United States have a credit card balance (according to a Federal Reserve Survey of Consumer Finances).

With more and more consumers putting away their cash and just relying on plastic, what is it specifically that you can do as a business owner to get the most out of your merchant account and continue to please your customers?

Negotiate Rates

First, if you've been with your merchant account provider for a while, it's time to evaluate your rates. Depending on processing volume and if you've kept your account in good standing by keeping chargebacks low, you have leverage now to negotiate your rates. You can negotiate both on the fixed amount and the percentage you are charged for each transaction. If your provider charges a minimum account charge if you don't reach the sales figure that it takes to maintain the account, this is typically the easiest to negotiate. If you make a strong argument for each of these items, they most likely won't want to lose you so put the pressure on.

New Avenues to Consider

The traditional system of accepting credit cards uses a credit card terminal or some sort of point-of-sale system like MICROS to perform the transaction. Behind the scenes, the merchant account is the pipeline that connects the bank and the institution offering credit to consumers. These providers contact the issuing institution to confirm funds are available for the transaction, process it, and then transfer those funds in your business bank account.

The same process now works with 41 million Smartphone handsets purchased in the third quarter of 2009, according to Gartner. People are now using their cell phones to make a transaction.

Mobile processing

You don't have to understand the language of Android or Smartphones in order to run an application allowing you to run credit and debit transactions in real-time. Companies like MerchantWare and iMerchant Pro make it convenient for a business owner to install the app, connect to the internet (WiFi, Edge or 3G network) and process the fee — no matter where they are. The downside of doing this has been that credit card processing companies typically charge an extra fee for entering "numbers-only" payments and sometimes, there is a greater chance of fraud, too.

The solution? Square, from the scientist that co-founded Twitter, is supposedly releasing a tiny, "square" credit card reader this summer. These readers (other companies are coming to the table and now competing to get the first of these kinds out there) allow merchants to swipe the credit cards using their phones. Regardless, no longer are the days where you need to purchase extra equipment — there's an app for that and it's cheaper, too.

Online processing

Online processing is another avenue you can use, especially if you are a consultant, a freelancer, or if you provide another professional service where you are selling your brain and not a physical good. The popular Freshbooks is one company that brought this to fruition — it allows business owners to keep track of client payment, send invoices to collect payment, and actually accept payment. The all-in-one solution doesn't use purchased software and just requires a monthly fee dependent on the number of accounts you process.

If you are just concerned with accepting credit cards, you can use other online payment services like PaySimple or DepositNow.

What about ecommerce?

Ecommerce transactions, if done incorrectly, can be poisonous to your business and your customers. Why? Security and fraud. To get more out of your merchant account with online transactions, make sure you choose a shopping cart that is secure, easy to use and navigate, and immediately processes the order. The cart does not process the payment, but it is the pipeline between your website and the service connecting to your merchant service account. A shopping cart can include a software that processes the card — similar to the magnetic strip on a credit card machine. All credible carts have secure placement.

With online processing, the fees are processed the same as the traditional way. However, some shopping cart providers will give you a "package deal" with a merchant account, but then you are bound to their provider, not the one you choose.

It's apparent that many businesses today are going from a brick and mortar store with traditional credit card machines to mobile swiping methods and ecommerce software programs linking to your merchant account. With improvements in processing, charging purchases and payments has become both faster and easier for everyone involved.

For security reasons, remember to double check any payments and purchases made over the internet or remote kiosks so both your profit as well as your customers' purchase are protected. With the multitude of options that are currently available, checking for rates, picking the easiest credit processing machines, and optimizing any merchant charges will likely offer plenty of dividends for your ROI.

In the end, whether your company relies on web shopping cart purchases or smaller in-person sales, your merchant account can help you maximize your consumers and their ability to do business. Taking the effort — be it talking to vendors, renegotiating rates, or looking into the ecommerce movement — will pay off in the long run and keep your credit processing accounts affordable, which in turn makes your business valuable to your public.

This is a guest post by Betsy Brottlund. Betsy is the Marketing Director for Resource Nation and Everything Business.