14 June 2009

About Merchant Account

A merchant account is a bank account that allows easy payment from customers by accepting funds from credit or debit cards.

Entering into the world of business is a very complicated thing. You have to deal with items, shipping, and lots of payments. It would have been simpler if payments would all be made in cash. But not all businesses, especially those that are online, survive on cash-only payments basis. Many have preferred a much better and easier way of paying and that is through debit and credit cards. Debit or credit card payments are the second method of payment after cash when shopping and it is very vital to any business to thrive.

What is a merchant account?

A merchant account is a bank account that accepts debit or credit card payments in any form of business. The account provider allows client’s credit or debit cards to transfer amounts to seller’s account in just a short time. Usually a “payment processor” manages all the transactions of the credit or debit cards of the buyer and into the retailer’s bank account.  Payments may be processed through accepting credit or debit cards over the phone, in person or by fax. It can also be processed in a more convenient way such as having an online payment gateway such as Pay Pal.

What are its benefits?

Having a merchant account gives tons of benefits. It saves the hassle of transacting payments personally and without having to see through them one by one. Through credit and debit cards, buyers can also be able to buy expensive items from any shop or company without creating any hassle to both the sellers and the buyers. It saves them time and from the trouble of paying instantly in cash or checks. It is especially in great use for online business transactions wherein buyers just add items to their shopping cart and payments will just be made with just some clicks.

How do I get one?

To get a merchant account, you can apply in any account provider that would render that type of service. There are many factors though before a merchant account may be approved such as the personal credit of the owner, the products sold, business longevity, financial strength of the business, chargeback history, monthly volume and transaction size, and return , exchange or refund policies.

What are the types of merchant account?

There are different types of merchant account. It could be over-the-counter (OTC) which are used for retail merchants with low transaction fees or discount rates because during transaction the credit or debit card is physically present. Money-order/telephone-order (MOTO) merchant accounts are used in Internet-based or online businesses. In using MOTO merchant accounts an account processor or payment gateway is usually recommended.

Are there fees when you have one?

Having a merchant account is not free and the owner must understand the provider’s terms and conditions. The account provider charges all the services for every transactions made in your account since it is the one who manages the entire retailer’s financial transaction between the buyers. The retailer may have to face fees like percentage or per-item transactions fees and some fees may be periodic. All these fees are arranged by the account provider according to the interchange fees set by credit and debit cards such as Visa and MasterCard. The fees vary on the transactions and the type of card. Other fees included are authorization fees, statement fee, monthly minimum fee, batch fee, customer service fee, annual fee, early termination fee, and chargeback fee. It is best to read and understand the application before signing.

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