Web Hosting Reviews & Ratings

June 11, 2009

The Truth About Free Merchant Accounts

Are you looking for a way to sell goods and services online?  If so, you may be interested in applying for a free merchant account.  Yes, they do exist.  Free merchant accounts provide a relatively inexpensive way for the small business owner to accept credit card payments via their website.  They really make a viable option for someone who does not meet the qualifications for the premium accounts larger companies rely on.  The benefits here are obvious, but the disadvantages lie between the fine lines.

How Does a Free Merchant Account Work?

A free merchant account is essentially as it sounds.  You don't have to worry about any costly setup fees and almost anyone can get an approval.  However, the trick is that the percentages charged per transaction are much higher.  Because a certain percentage of every transaction usually goes to a third-party processor, one could say that this so-called free merchant account is anything but.  You also have to deal with other tricks and limitations that come along with the service.

For example, some free merchant account providers only cater to businesses that sell certain types of goods.  In most cases, this means that you can only sell tangible goods, products that can be touched, opposed to services.  Depending on the nature of your business, this could be a major set back.  Other stipulations attached to free merchant accounts may require you to sell a certain amount of products over a certain amount of time in a certain price range.  When looking at these disadvantages, it becomes much clearer to see why so many businesses, even the smaller ones, choose to go with premium merchant accounts.

Polices and the Issue of Fraud

There are a number of factors to consider in regard to free merchant accounts apart from what has been discussed in this article.  One of the most important of all is the policies involved.  You need to be aware of the policies as they relate to keeping your funds in reserve as well losses associated with fraud.  The vendor may attempt to reserve your funds to accommodate customer returns or chargebacks.  The latter is a very heated issue in the realm of e-commerce as they have often been linked to customers looking to cheat the merchant and commit fraud.  Whatever the case may be, it is critical to make sure the polices are clearly laid out before signing up with any merchant account provider, be it a free or premium solution.

Conclusion

Free merchant accounts are not all bad because some companies provide capable software that accurately calculates state taxes, shipping and handling charges and other e-commerce realted factors.   Others offer gift and incentive cards that you can use to reward your frequent customers. The key is to know what you're getting into and read the fine print regarding transactions fees and policies upfront. After weighing all the important factors, will you know whether or not a free merchant account is best for the needs of your business.

Tags: merchant account,  free merchant account,  fraud,  e-commerce,  credit card payments,  chargeback