Merchant Accounts Exposed
January 21, 2009
There are several types of merchant accounts depending upon the type of business environment and products offered by the merchant. It’s important to be accurate and complete in filling out the merchant account application form so that the correct type of merchant account can be provided.
INTERNET MERCHANT ACCOUNT
The internet merchant account allows the ecommerce merchant to accept credit or debit cards over the internet. This is accomplished by use of a payment gateway which is the actual processing medium, and by a bank or service provider. Both the payment gateway or point of sale terminal and the merchant account provider are required to complete the transaction.
HIGH RISK MERCHANT ACCOUNT
Certain types of businesses are considered to place the bank or merchant account provider under a higher risk for bad publicity, excessive losses, or potential illegal activity among other factors. These merchant accounts are generally charged a higher rate because the merchant service provider is considered to be likely to incur greater risk for losses. Businesses which may fall under a high risk category might include adult entertainment, pharmacies, travel businesses and telemarketing companies.
OFFSHORE MERCHANT ACCOUNT
Often, a merchant who is considered a high risk merchant will apply for an offshore merchant account rather than to pay the excessively high fees which might be incurred as a high risk merchant. Offshore merchant accounts are provided through countries such as Europe, Asia, and the Caribbean. Offshore merchant accounts are often provided along with incorporation services in certain countries.
Certain types of industries commonly apply for offshore merchant service provider accounts since the controls and governmental regulations associated with the businesses may be less stringent offshore. For example, gaming industry accounts may no longer be able to operate in the United States due to governmental regulations. Pharmacy sites may be restricted by onshore companies but be able to operated as an offshore business. Adult sites are another industry commonly forced to use an offshore merchant account, due to the regulations and requirements by local jurisdictions.
RETAIL MERCHANT ACCOUNT
This is considered to be the standard merchant account. The customer walks into a place of business and purchase the item desired. The credit or debit card is swiped through a point of sale terminal or the information from the card is keyed into the terminal and the sale authorized on site. The purchase is paid for before the customer leaves the store. This type of merchant account generally requires some type of authorization terminal which is rented, leased, or purchased along with contractual obligations for the term of services.
HIGH VOLUME MERCHANT ACCOUNT
Sometimes merchants will purchase an offshore merchant account because the volume of their onshore transactions is too high for the merchant service provider to accept the risk. Many times the offshore jurisdictions will have more lenient licensing or control rules than the onshore merchant service provider companies can allow.
No matter which type of account is acquired, it’s important to be accurate and complete in describing the business on the application forms. Inaccurate or incomplete information can result in the loss of the merchant account and in other penalties.
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