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Can I get a Free Merchant Account?
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No Not really. If your business needs the ability to accept credit cards but you don’t want to have to complete the application and process the credit cards yourself, there are other options. One of the options is a third party payment processor. These companies don’t allow you to use their credit card merchant account. That would be a violation of their merchant account terms. Allowing one business to use another business’s merchant account is called factoring. These third party payment processors process the credit cards themselves for a fee and then pay you independently. Or they ‘buy’ the product from you at a wholesale price (your retail price less their fees) and sell it to your customer at the retail price.

It may sound like a technicality but it’s not. Your business does not have access to the customer’s credit card information. Nor is your company paid by the bank. The fees are a percentage of the retail product price plus a flat transaction fee. Keep in mind that both fees will be higher than if you had the merchant account for your business. The merchant account fees and a profit margin are incorporated into the fee you pay to the third party processor.

The disadvantage of third party processors is that they can withhold money from your account with them for various reasons. If the customer decides to refuse to pay for the product and requests a charge back from their credit card, the third party processor is responsible for giving back the money. Some third party processors charge a reserve amount to cover these types of occurrences. Others can freeze your account and not allow withdrawals until the charge back amount is covered.

I have an Online Store do I need an Ecommerce Merchant Account?
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That depends on some factors. Individuals are not allowed to have a business, or ecommerce merchant account, so your ecommerce business would have to be a business, not just you acting as a business. You’ll most likely have to have a Federal Tax ID number established and a separate business checking account. If your ecommerce site is more of a hobby than a business it may not warrant the extra expense of an ecommerce merchant account.

The bank providing the ecommerce merchant account will look at your business’ credit rating and your personal credit rating; if either has black marks the odds are the account won’t be approved. Another factor is the volume of sales. If your ecommerce business generates less than $1000 per month in sales then it wouldn’t make sense for you to have an ecommerce merchant account. The fees would eat into your profit margin.

You also should consider the number of sales transactions your ecommerce site generates per month and what you sell. There are alternatives to your own ecommerce merchant account and that’s using a third party processor. Your site can accept credit cards through the third party. You don’t have to have a secure site, gateway, or pay the monthly statement fees.

What Is a Business Merchant Account?
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A business merchant account is a method by which your business can accept a credit card. It’s convenient for customers since the majority of consumer product sales these days are paid for through the use of a credit card. Major credit cards include MasterCard, Visa, American Express and Discover Card.

Only established businesses can have a business merchant account, individuals are not authorized to use business merchant accounts. You can not use your business merchant account for personal use; that’s a violation of the terms of service for both MasterCard and Visa. It is also a violation of the terms of service for one business to allow anyone else to use their merchant account. In other words if a friend of yours has an online store you can’t allow that person to use your merchant account to process their credit card payments.

Here’s a simplified explanation of how the process works: Customer uses credit card to pay for product. Business takes credit card information and uses their merchant account to charge the customer’s account. The bank that holds the merchant account verifies the credit card and debits the customer’s credit card account and credits the business’s account. After a predetermined length of time, the bank deposits the charge into the business’ checking account.

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