If you operate a traditional brick-and-mortar business, then you’re probably well-served by your retail merchant account with pricing based on “card present and swiped” transactions. You may receive a few telephone orders, but that small number of transactions can be easily entered by hand.
On the other hand, if you operate an e-commerce business that receives orders strictly over the Internet, a MOTO account is probably the only account you’ll ever need. MOTO accounts utilize a pricing structure that assumes your transactions will always be taken via mail order, telephone order, or Internet. In other words, the cards will not be present, so it’s not possible for you to read the magnetic strips with a terminal. Many e-commerce business do occasionally get walk-in customers, but these sales are relatively few are far between.
But how about those of you who don’t fit neatly into either group? You’re part of the growing number of businesses that operate primarily online while maintaining a strong, local retail presence. For you, it may worth the monthly costs to open a second merchant account. There are at least two advantages in having a separate e-commerce and retail account. First, separate accounts allow you to easily distinguish between your two revenue streams since each account will show its own daily deposit in your checkbook. The second advantage is cost savings. Because retail accounts don’t handle e-commerce transactions well, and because e-commerce accounts don’t handle retail (swiped) transactions at all, you’ll experience more downgrades (surcharges) when forcing your account to perform double-duty.
So how can you know that the savings will justify paying for a second account? Since this question usually comes from e-commerce clients who are expanding into brick-and-mortar retail, I’ll explain that scenario. First, you’ll need to know what percentage, on average, will you save on each transaction if you open a retail account. If your best e-commerce rate is 2.20%, improving to 1.70% with a retail account, then your expected savings is 0.50%. Next, you’ll need to know how much you’re going to pay to maintain the second account. Are there monthly minimums? If you’ll only be paying for a second statement fee, say $10/month, then that’s your additional cost. Finally, divide your added costs ($10) by your expected average savings (0.005), and you’ll see your break-even point is $2,000. That means that unless you’ll be processing at least $2,000 per month through the new retail account, you won’t save enough to cover the added costs.
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