Knowing the types of merchant accounts that are available will help you find the right one for you. Don't make the mistake of choosing the cheapest option - you may be sorry down the road.

A retail or "swiped" account often offers the lowest rates but if you don't meet the particular requirements of the account, you could end up paying fees, surcharges and penalties.

There are 3 basic types of merchant accounts available:

Retail / Swiped

This type of account is meant to be used by "brick & mortar" retail businesses, where you can physically swipe the card through a card reader. This provides proof that the card was actually present during the transaction, which is why the rates are lower - there is less risk because the card is present.

A retail account is best for you if you are able to physically swipe the card in 90% or more of your transactions.

Retail / Keyed Entry

This type of account is meant to be used when the card is present but for whatever reason can't be swiped. This could be the case if you are mobile, say a business that goes to customer's houses where you don't have a swipe machine.

In this case, you would get a manual imprint of the card but enter the information into the electronic terminal after the fact. The rates charges on this type of account are typically more than a swiped account.

Mail Order / Telephone / Internet

These accounts are meant for businesses who don't normally see their customers in person. The card is not usually physically present and can't be swiped or imprinted.

Because there is a higher level of risk involved, the rates and surcharges are normally highest for this type of account.

If you're doing business online, however, this is likely the type of account you will need. If you use one of the other types for internet transactions, you could be leaving yourself open to penalties and even chargebacks so it's not worth the risk to save a little on fees.

Internet accounts usually also require that you collect specific information from your customers. You typically need to get their name and billing address when they place an order, to verify that they are in fact the cardholder.