Understanding Merchant Accounts

Understanding Merchant Accounts- Complete Controller.

Merchant accounts are a type of bank account for businesses that enables them to accept debit and credit card payments. They are basically agreements between three parties (retailer, payment processor, and merchant bank) for the settlement of transactions involving credit and debit cards.

The process concerning the transfer of funds is simple. First, the payment is deposited into the merchant account. From there, they are shifted into the bank account owned by the business. This transfer into the business account can occur daily or weekly, varying according to the merchant bank providing the merchant account services.

Having an Internet merchant account is necessary if you want to start an e-commerce business that accepts credit card payments.ADP. Payroll – HR – Benefits

Getting a Merchant Account

Getting a merchant account isn’t that simple. Many factors come into play when you’re applying for one. Merchant account providers have to minimize their risks. They look at a variety of things before approving your merchant account. Here are some questions that give you an idea of what information the bank will look at.

  • Does your business have a high risk of credit card fraud?
  • How long has your business been operating?
  • Is there an event in your business’ history that is worth taking note of? (e.g. Bankruptcy, Default)
  • Does your business have any other merchant accounts?
  • How is your personal credit history?

Getting approval for a merchant account from a bank that holds your business and personal account is easier.

If the answers to the questions above do not look favorable, your account may still be approved. However, the merchant bank will likely charge higher transaction fees as reassurance of their risk. That high fee can be renegotiated when the business is in better standing.

CorpNet. Start A New Business NowInternet Merchant Accounts

An Internet merchant account is specifically used to hold and transfer funds originating from online credit card transactions. These accounts usually have a higher fee than a regular merchant account, as internet card transactions involve a higher risk.

Internet card transactions include one more thing: a payment gateway that carries out the authentication of credit card information just like a POS machine does in a retail store. The payment gateway forwards the transaction information to the credit card company, which then authorizes the payment. Some merchant banks offer a solution that finishes the requirement of having a separate payment gateway.

You must know that you will need a separate Internet merchant account for the different types of cards that you want to accept. It is more convenient to get your internet merchant account through a third-party provider, such as Moneris, PS iGATE, Internet Secure, and many others.Complete Controller. America’s Bookkeeping Experts

The Structure of Fees

There are many different types of fees attached to merchant accounts. Some may be mentioned in the contract, but other fees might not be mentioned. Here are a few that you should expect:

  • Setup Fees
  • Application Fees
  • Discount Rate
  • Monthly Fees
  • Per Transaction Fees
  • Credit Card Terminal Rent
  • Cross Border Fee

Excessive fees might hurt your business margin, so comparing how much you will have to pay for your business’ merchant accounts is important. Also, carefully examining merchant account contracts can help you avoid minimum term agreements that may require a penalty for cancellation.

Alternatives to Merchant Accounts


This service offers a complete solution for online transactions. By only paying per transaction, you can avoid several fees. PayPal can also improve your margin, which gets smaller and smaller due to the extra fee associated with using internet merchant accounts.

You can simply place a PayPal pay button on your website’s checkout page. You can also use the Website Payments Pro option, which offers a more professional payment interface for your e-commerce website.

Credit Card Reader

These are devices that connect to your phone to carry out transactions. Offered by various service providers, they are very cheap (or even free) and charge a reasonable per-transaction fee.

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