A merchant account allows businesses to process debit and credit card purchases. Often, merchants can get this service through their membership of a specific bank or credit card.
In order to have an account, you must make an agreement with a merchant acquiring bank and this bank will process credit card and debit card transactions. You can also set up an aggregator, such as PayPal, that the payment also passes through, often for the convenience of the buyer. You as the merchant must obey operating regulations established by the card brands in order to have this kind of account.
With a merchant account, you can process credit and debit cards, however, this is not as straightforward as it may sound. There are numerous ways to do this. As mentioned above, you can use an aggregator, such as PayPal. If your business is in a brick and mortar building, you can get a credit card terminal. This simple machine lets customers swipe their debit or credit card when making a purchase. Other options include virtual terminals and telephone transactions.
You should be aware when you get a merchant account that there are some fees that come along with the service. Some are charged per item, for example you will have to pay a few cents per card-based transaction. In other cases, the fees are based on a percentage. These will all depend on the banks involved and this includes both your bank and the bank backing the cards your customers use.
Other fees include an authorization fee, incurred each time a card is used, and a statement fee, which stems from the bank statement you receive each month. There could also be a monthly minimum fee, which is just a way for the banks to make sure that you are paying a minimum amount each month to cover their costs as the provider.
A chargeback fee is worth learning about as it is your biggest risk as the merchant when you open this sort of account. It is not a refund, which is you just undoing a transaction. A chargeback can leave you open to potential losses and your bank may also charge you fees if they see you making many chargebacks, so these are to be avoided if at all possible.
Many people will try to market accounts to you and these suppliers may be your bank itself, but other service providers will go through your bank to market to you. The best way to go is through a reliable, trusted source, such as a well-known bank or credit card company. There are plenty of scams out there that could hurt your business if you do not use a trusted source.
Most transactions nowadays are done with a card rather than with cash. It is therefore important for you to update your business with credit card processing services. Doing this can require some diligence and research, but as long as you use a trustworthy source, such as an established bank, you can be on your way to a merchant account in no time.