A merchant account is a type of business bank account that is used to accept and process credit and debit card transactions. A merchant account is often required for various businesses, especially for online operations. Specifically, this account is used to identify the seller as the owner of the purchase. Owner and transaction information is sent directly to the bank.
This bank account is issued by acquiring a bank for a certain provider under a payment card transaction settlement agreement. Sometimes an independent sales organization, member service provider or other payment organization takes place as a third party in the merchant contract. After signing a trade agreement, the seller is contractually obligated to comply with the regulations of card associations, such as MasterCard or Visa.
Functions of Merchant Accounts
There are two main categories of merchant accounts which are usually chosen by different companies depending on their type of operations. “Swipe Card” means the transactions of a customer who pays for their purchases in person and is required to swipe or insert their credit or debit card. This kind of merchant account is mostly used in retail. “By key” refers to transactions where credit or debit card information is entered into a virtual terminal, typically using the internet. This kind of merchant account is mostly used by e-commerce merchants, but some merchants decide to use this method also in face to face transactions, being cheaper.
Use of the Merchant Account
Likewise, in the same way that you are able to deposit another person’s check into a checking account, a merchant account servicesallows you to accept a card payment from a customer. Meanwhile, the merchant account does not hold any money like checking accounts or other deposit accounts. Instead, the card payment goes through the merchant account through a payment gateway, and once the funds are available, they are deposited into a checking account. Usually, it takes up to 48 hours from the time of the transaction until the money is deposited into the seller’s checking account. Also, instead of receiving multiple deposits for each transaction, all of a business day’s payments are combined into a single deposit payment called a “batch”.
The merchant account can also be explained as a line of credit account due to the fact that the seller is paid before the actual funds are collected from the customer. This means that the seller may be subject to a credit check or a requirement to sign a personal guarantee.If you have any further questions regarding the merchant account – please do not hesitate to contact our banking specialists for a detailed consultation.
Merchant Account Payment Procedure
Even though merchant accounts are widely used for commerce and e-commerce, you should understand that it differs significantly from other types of accounts. These differences can be technical, but you should be aware of the merchant account payment gateway high risksystem and its functions, before choosing to open one.When a customer makes the transfer (payment) to your business through a merchant account, the entire payment process can be broken down into 4 main steps:
Online payment. A customer is buying something, probably online, using their debit / credit card. This is the moment when the entry is made and the payment procedure is initiated;
Verification of payments. The transaction is being processed and authorized by the payment system service provider;
Transfer. Once the transaction is verified and approved, the money is transferred from your bank account to your company’s merchant account;
Lot. Instead of instantly transferring every single payment, in the next few days all payments will be accumulated in your merchant account and then transferred to your bank account in one transfer.