Almost all businesses accept debit and credit cards these days – even service businesses and B2B ventures. Having a way to accept a card is critical when you get ready to operationalize and start your business. You’ll need a merchant account – something provided by financial institutions that lets you accept cards for payments.
In order to get a merchant account, your business signs an agreement with your bank or another entity like PayPal that sets legal terms which you agree to and which allow you to receive funds for services or products sold, put forth terms for disputes, and so on.
If your business is a brick-and-mortar shop, or has an in-person component, you may need a credit card terminal – one of those machines you see in so many businesses where the card’s magnetic strip is swiped and the information is sent by phone line or Internet to confirm the card is legitimate and has a balance to pay the bill. The online equivalent is a payment “gateway” that processes payments from your online store through to your merchant bank and back. The card terminal and payment gateway may or may not be from the same bank or company as your merchant account – it pays to ask your merchant account provider for recommendations. Authorize.Net has a very nice graphic example of how online store credit card processing works on their website.
One thing that is important to understand is that merchant accounts don’t have to come from your bank. There are many firms that offer accounts at different rates. This article about Fighting Credit Card Processing Fees may prove useful. FeeFighters has a nice guide to becoming a “Credit Card Processing Ninja” that explains the entire process end-to-end.
Based on the kinds of cards people present (plain old Visa vs “points back” or “bonus cash” cards) you can end up paying different percentages to your processor. Processor fees can vary and different contracts can lock you in for specific rates after introductory periods. It pays to shop around and get the best rate you can for your business.