Clients and networking connections always ask about payment processing best practices. Should we have our own merchant account or aggregate account, what is better for a business? In order to answer this question, it is important to understand both and then make the best decision.
Let’s break it down.
What is a Merchant Account?
A merchant account is a protected, underwritten and FDIC insured credit card processing account that you/the business owns. Accounts can usually be set up in a couple of days and have a small amount of required paperwork. You are offered due process to fight charge backs and you have rights to know your customer (KYC).
Features to consider:
- You own the account – your funds are in your own account and you can see the details of each transaction
- Overall lower cost – rates are based on the actual cost of processing, per the card your customer uses, lower fees for debit and true credit card accounts (higher rates for perks and reward based cards)
- FDIC insured – your funds are protected by the Federal Deposit Insurance Corporation
- PCI Compliance support – following the steps to maintain PCI compliance protects your account and can reduce overall processing costs and limit fees paid
- Dispute resolution – charge backs and delayed are never
All TransAct accounts are a full merchant account and with this comes 24/7, 365 support from a live help desk and management team. We are available for new account setup, training employees and onboarding new equipment, software and future employees. We are with you as you grow.
What is an Aggregate Account?
An aggregate account is also known as a sub account, and is a popular way to collect and process credit card payments. Accounts can usually be set up quickly, using a provider like Square, PayPal or Stripe and there are limitations to the benefits. While the “rate” is set and more predictable, these are best for smaller start up businesses that do not have a high total transaction count, dollar amount per transaction, and have lower annual revenues.
Things to consider:
- Limits on processing – the limit relates to your initial estimates and going over these estimates can delay fund deposits or account holds
- Low to no support – online FAQs or resources are typically available to trouble shoot on your own
- Required hardware – must use equipment specified by the provider not available to buy somewhere else. However, equipment may be low cost or free (aka included in your total cost of processing)
- Difficult to fight a charge back – if a customer disputes the transaction, there is little recourse (even if you delivered the product or service); fighting to regain your funds is time consuming and you must go through their process
- No insurance needed – the processor assumes this and bundles this cost into the fees across all accounts
Payment Processing Best Practices
Here are other points to keep in mind.
There are many factors to consider and we are advocates for payment processing best practices. Learn about the options and the financial tools you have at your disposal when running a business. Choosing a provider is an important decision and be sure to factor in the pros and cons.
For example, Square also aggregates customer information. This means other retailers and restaurants may have access to those details and may be able to market to your customer. New accounts have been required to wait up to 30 days for first (and even subsequent) deposits.
Know your customer (KYC) is a growing concern with increases in online fraud and cyber attacks. As a business, you should be able to contact your customers who are purchasing your products and services. Further, you should; know they are doing so with their own funds.
Overall, both established and new businesses can benefit from having a dedicated merchant account. In the long run, the total cost of payment processing will be lower (typically at least 1%). TransAct customers typically see even greater reductions when converting to their own account.
If you are interested, learn more and evaluate your current business. See if a TransAct Merchant Account is right for you. We are here to support you and your business growth into the future.