Choosing a Merchant Account
« on: October 01, 2011, 01:50:26 PM »
Why should I get a merchant account?

Customers need a convenient and safe way to send payment. Money orders and checks are not very convenient nor are they safe. As a seller, you need to close the transaction quickly. In case you need to wait for the customer to keep in mind to mail you a payment, there's plenty of things that can break the sale. So credit cards are a technique by which the customer can place the order quickly.

Yes, payment services such as PayPal will work and is in fact the technique of choice for most customers. But there's drawbacks. Often both buyer and seller must register for an account with the same service. The charge may appear on the customer's card as a charge from the service - not the actual merchant. Sellers complain about payments being accepted in to their accounts which they do not need, such as payments from unverified accounts with unconfirmed addresses. Sometimes a minor issue leads to a whole account being restricted (something which ought to never happen with actual merchant accounts) and payments continued to be accepted in to these restricted accounts (which would NEVER happen with a actual merchant account). Payment services often permit scammers to hide their identities. Disputes often go from the buyer to the buyer's credit card to the payment service and then to the seller. There's plenty of points along the line where the ball can be dropped and an innocent party made to pay for it. There is little incentive for the service to fight on behalf of the seller. Even if all the proper efforts are made, it is often determined that a scammer used a loophole in the method to perpetrate the fraud. If there is no money remaining in the scammer's account (and there would not be) the victim loses.

With a merchant account you deal directly with the buyer and select in case you need to charge the card. With a payment service all you know about the buyer is what the service tells you. If the buyer used a stolen credit card or changed addresses, you would not know about it. I did have a buyer try to get back his PayPal payment made to me because I shipped to an elderly address from which they had moved years before. That was the only address I was one time given by PayPal because the buyer had never updated it. Fortunately PayPal ruled in my favor. With a actual merchant account the buyer could not have made such a mistake. So while services like PayPal and Google are fundamentally safe if some common sense is used, they still add complications which can make it less safe for the seller.

Since very somebody can get a PayPal account, plenty of buyers have decided that a seller who has his own merchant account is more reliable than a seller who only accepts payment through a service. Plenty of buyers do not need to join a payment service in order to make a purchase. Plenty of sellers have discovered that having their own merchant account not only gives them a more professional appearance to their buyers, it also gives them more protection against fraud.