Posted by Jeff Shavitz on Wed, Aug 19, 2009 @ 04:14 PM
The two basic types of merchant accounts are "card present" and "card-not-present". Each basic type of account has subcategories that are defined by business type or how a credit card transaction is processed. Here are a few of the basic categories:
Card-Present Merchant Account: Any merchant account where the credit card and customer are present during the transaction, and the merchant is able to swipe the customer's credit card through a credit card machine or a magnetic card reader that is connected to a physical phone line. Typically this is a Retail Merchant Account - which are considered low risk and have the lowest merchant account fees and rates.
Wireless Merchant Account: A wireless merchant account is a card-present account where credit card transactions are swiped through a portable credit card machine or magnetic swipe reader to obtain a real-time authorization. Wireless merchant accounts typically have the same low rates and fees as retail merchant accounts, but higher monthly fees and initial equipment costs.
Store-and-Forward Merchant Account: Similar to a wireless merchant account, except this type of account does not provide real-time authorization. Transaction information is stored in the terminal's memory and forwards to the processor when hooked up to a phone line. This type of merchant account is ideal for business types that require portability, but may not have the budget for a wireless merchant account.
Card-not present Merchant Account: Any merchant account where the credit card and customer are not present when the transaction takes place, these accounts are considered to be higher risk by acquiring banks and are therefore charged higher processing rates and fees than Card-present accounts.
Internet Merchant Account: A card-not-present account that is used by an online business to transactions through an electronic payment processing gateway. When processing online it's just as important to get a good payment processing gateway as it is to get a good merchant account provider.
Mail Order Merchant Account (MOTO): The most common form of card-not-present accounts, this type of account assumes the businesses will not have the customer or card present for a transaction and that most transactions will be manually entered into a credit card machine. Mail Order merchant accounts are given the lowest possible processing rates and fees of all card-not-present account types.
Touchtone Telephone Merchant Account: Just like it sounds, no credit card equipment is needed with this type of account. It's a good alternative to wireless processing for businesses that require real-time authorizations while on the go but can't afford the upfront investment that is required for wireless processing terminals. Touchtone processing usually has significantly higher rates and fees than other card-not-present accounts, because there is usually another company aside from the merchant service provider that supplies the touchtone system, and they charge a fee for their services. Even with the higher rates and fees, the initial cost of a touchtone merchant account it usually very reasonable.