Free merchant accounts does not require a membership or start-up fee, easily approve applications, has a higher percentage rate of transaction fee, and does not provide focused customer support. On the other hand paid merchant accounts require a start-up fee, has a lower percentage rate of transaction fee, have a customer oriented support, and secured transaction gateways.
In deciding which merchant account to choose one should take note of the requirements of such service provider. Assess the needs and capacity of your business to maintain such merchant account. Free and paid merchant account both offers the same financial service in processing credit card purchases and transaction. However, they differ on the following service points discussed further below.
Free Merchant Accounts:
Free membership or start-up fee
Unlike paid merchant accounts, free merchant account does not require membership or start-up fees. Since a merchant account is also an advantage option for increasing sales, it is ideal for merchants to avail of the free trial and set-up offered my most free merchant account to assess its functionality. Free merchant account is ideal for starting small business having lower capital or budget.
Easily approve applications
Most free merchant accounts also approve merchant applications easily compared to other financial institution such as banks. Most banks require high standard policies and only accept stable business that can meet their standards. Often time smaller business that gets rejected by paid merchant accounts can conveniently have a free merchant account. Free merchant accounts even accept merchant with bad credit history considering that the client can comply with the basic requirements needed and a more strict service policy agreement.
Higher percentage rate of transaction fee
Higher percentage rate of transaction fee is collected from using a free merchant account. This is because no registration or start-up fee is required; the company must find a business strategy to equate revenue by collecting higher percentage rate and charge back fee in every credit card transaction purchase that the company will process.
Paid Merchant Accounts:
Requires a start-up fee
Paid merchant accounts collect start-up or registration fees from clients to ensure customer oriented support and rebates or freebies supported by most financial institutions. The start-up fee is also necessary to guarantee a secure and stable gateway transaction process.
Lower percentage rate of transaction fee
Lower percentage rate on every transaction purchase is one of the upside in using a paid merchant account. Lower transaction fees and charge backs provide low cost expenditures and higher savings. Since paid merchant account already collected a mountable set-up fee it is only reasonable to collect lower percentage rate on transaction fees and charge backs.
Customer oriented support
A paid merchant account generally provides round the clock customer support to ensure a credible and secure transaction. Technical and customer support are given investments by paid merchant account provider to ensure that all transaction are secured and protected from frauds and scam artists. Financial institutions will also provide more rewards and freebies to paid merchant account holders.
It is important to always take note that each type of merchant account offers both advantage and disadvantage pointer. What is important is for you to be able to asses on what your business could truly afford and need.
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