What is a Merchant Account?

Tuesday, 05 Oct 2010 03:50 PM

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Whenever you purchase a product using your credit or debit card, invariably the seller swipes your card on a small machine and you get a receipt confirming the payment. But have you ever wondered what happens in between the card swipe and the payment to the account of the seller? This transfer of funds from your card to the seller is facilitated by a merchant account.
 
Similarly, when you visit an e-commerce website, you first select the product you wish to purchase and move it to your shopping cart. The next step involves making payment for this product with the help of your credit or debit card. Here again an internet merchant account facilitates the payment of funds to the seller from your card.
 
What is a merchant account?
So, what is a merchant account? It is a bank account that is required by businesses to get the payments made by their customers through credit or debit cards. The merchant account generally serves as a link between a retailer, a bank, and the payment processor such as Visa and MasterCard.
 
Such services are more important online. Here also, you can get an internet merchant account, which is a bank account that allows the businesses to process the payments made through credit cards over the internet. Besides banks, there are various providers of internet merchant accounts such as PayPal.
 
Online, you also need a payment gateway for processing of payments received by businesses from their customers. Typically, a payment gateway serves as the link between the retailer's merchant account and the credit card company of the customer.
 
Where to get it?
The next question that might come to your mind is where can you get a merchant account. Almost all banks provide merchant accounts, but their charges can be high. However, an economical merchant account can be opened with some specialized service providers operating in the market. These entities, such as Merchant Warehouse, InstaMerchant, and Durango Merchant specialize in the e-commerce space and can provide both merchant accounts and payment gateways.
 
You can also opt for third-party payment processing service providers such as PayPal, 2Checkout, and ClickBank. These entities provide you with both merchant accounts and payment gateways.
 
Compare and choose.
It is advisable to compare various credit card merchant services before selecting one for your business. However, the comparison should not be limited to rates and charges alone. There are a host of factors that need to be compared. These include how robust the system or platform is for the merchant account, merchant processing service, payment gateway, and internet merchant accounts.
 
The fees and charges that should be compared include registration, gateway, statement, transaction, minimum maintenance, and technical support fees. You should also compare the commissions and discounts, if any.

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