A merchant account is a type of bank account that allows businesses to accept and process credit card payments. Merchant accounts are established with a bank or other financial institution and then linked to a business’s payment processing system.
How Merchant Accounts Work?
In order to understand how merchant accounts work, it’s important to first understand the basics of credit card processing. When a customer pays for goods or services with a credit card, the credit card company approves the transaction and transfers the funds to the merchant’s account.
The merchant account provider then holds onto the funds for a period of time (usually 1-2 days) to allow the transaction to clear. Once the transaction clears, the merchant account provider transfers the funds to the merchant’s bank account.
There are a few different types of merchant accounts, but the two most common are “direct” and “third-party.”
Direct Merchant Accounts:
A direct merchant account is an account that is set up directly with a bank or other financial institution. Direct merchant accounts are typically used by larger businesses that process a high volume of credit card transactions.
Third-Party Merchant Accounts:
A third-party merchant account is an account that is set up with a third-party processor. Third-party processors are companies that provide credit card processing services to businesses. They will typically set up a merchant account for you with a bank or other financial institution.
Third-party merchant accounts are typically used by smaller businesses that process a lower volume of credit card transactions. They can also be used by businesses that have been declined for a direct merchant account.
How to Setup a Merchant Account?
There are a few different ways to set up a merchant account, but the most common method is to use a third-party provider, such as a credit card processor or payment gateway. This is because setting up a merchant account through a bank can be a lengthy and complicated process.
Third-party providers will typically charge a monthly fee, as well as a per-transaction fee. However, these fees are generally much lower than the fees charged by banks.
When choosing a third-party provider, it’s important to compare the fees and terms of each provider. It’s also important to make sure that the provider is reputable and has a good customer service reputation.
The process of setting up a merchant account is generally quick and easy. However, there are a few things that you need to do in order to get started.
1. Choose a Third-Party Provider
The first step is to choose a third-party provider. As mentioned above, there are a number of different providers to choose from. However, not all providers are created equal. It’s important to compare the fees and terms of each provider before making a decision.
2. Set up an Account
Once you’ve chosen a provider, you’ll need to set up an account. This usually involves filling out an online application. During the application process, you’ll be asked to provide some basic information about your business, such as your business name, address, and contact information.
3. Link Your Payment Processing System
After you’ve set up your account, you’ll need to link your payment processing system. This can usually be done by entering some simple information into your provider’s online portal.
4. Start Accepting Credit Card Payments!
After you’ve linked your payment processing system, you’ll be able to start accepting credit card payments. In most cases, you’ll simply need to enter the amount of the purchase and the customer’s credit card information. The transaction will then be processed by your provider.
5. Monitor Your Account
Once you’ve started accepting credit card payments, it’s important to monitor your account. This will help you catch any fraudulent activity and resolve any issues that may arise.
By following these simple steps, you can set up a merchant account and start accepting credit card payments in no time.