Most customers expect you to accept debit and credit card payments. To do so, you need a merchant account. Here’s what to do when you’re opening a merchant account. And what is a merchant account? Your business needs an account to accept debit and credit cards in both offline and online modes. When researching credit card processor services, consider fees, hardware support, customer support, and contract length.
Therefore this article is for business owners who want to accept debit and credit cards, learn the merchant account fees involved, and understand how payment processing works. Credit cards don’t process themselves. This is where accounts come in.
What Is a Merchant Account?
It is a type of bank account that allows businesses to accept credit and debit card payments.
There are two types of merchant accounts:
- An Internet account allows businesses to accept credit and debit card payments online.
- A retail account allows businesses to accept credit and debit card payments in person, through a point-of-sale (POS) system.
Do I need a merchant account?
If you want to accept credit and debit cards, you will need a merchant account. This is non-negotiable.
There are a few exceptions. For example, if you use a payment gateway without an account (more on this later), you may not technically need a merchant account. But, in reality, you’ll still need something that functions like a merchant account. The bottom line is that if you want to accept credit and debit cards, you need a multi-currency merchant account.
How much does a merchant account cost?
The cost of an account will depend on the type of account, the payment processor, and your business’s risk level.
Here are some of the fees you can expect:
- Application fee: This is a one-time fee charged by the payment processor to set up your account.
- Monthly statement fee: You will be charged a monthly fee for receiving your credit card statement.
- Monthly minimum fee: You may be charged a monthly minimum fee even if you don’t process any credit card transactions.
- Transaction fee: You will be charged a per-transaction fee every time you process a credit or debit card payment.
- Discount rate: This is a percentage of each transaction that is deducted from your total sales. The discount rate includes the transaction fee and other processing fees.
- Additional fees: There may be other miscellaneous fees, such as chargebacks, customer service calls, etc.
How do merchant accounts work?
When a customer pays with a credit or debit card, the payment is routed through the card network (e.g. Visa, Mastercard) to the customer’s bank. The bank then sends the payment to the payment processor.
Therefore the payment processor then deposits the funds into the merchant’s account, minus any fees. The entire process usually takes 24-48 hours, but sometimes it can take up to a week for the funds to show up in the merchant’s account.
What is a payment gateway?
A payment gateway is a piece of software that allows businesses to accept credit and debit card payments online. A payment gateway is similar to an account in that it routes the payment through the card network to the customer’s bank.
Therefore the main difference is that a payment gateway doesn’t actually deposit the funds into the merchant’s account. Instead, the funds are deposited into a holding account, and the merchant has to manually transfer the funds to their bank account.
What is a payment processor?
A payment processor is a company that handles credit and debit card payments for businesses. It will set up your account and provide you with a payment gateway (if you need one).
A payment processor is different from a payment service provider (PSP) in that PSPs also provide other services, such as fraud prevention, invoicing, etc.
What is the difference between a merchant account and a Payment Service Provider (PSP)?
A Payment Service Provider (PSP) is a company that provides businesses with the ability to accept credit and debit card payments. Therefore PSPs usually provide other services in addition to processing payments, such as invoicing, fraud prevention, etc.
What Is a Merchant Account? It is a type of account that allows businesses to accept credit and debit card payments. A merchant account is not the same as a bank account – it is a separate account that is used only for processing credit and debit card payments.
There are a few different types of merchant accounts, including:
- Retail merchant accounts: These are the most common type of account and are best suited for businesses that process in-person transactions, such as brick-and-mortar stores.
- E-commerce merchant accounts: As the name suggests, these are merchant accounts designed specifically for businesses that operate online. E-commerce merchant accounts come with a few additional features, such as the ability to process recurring payments.
- Mobile merchant accounts: Mobile merchant accounts are similar to retail merchant accounts, but are designed for businesses that process transactions on the go, such as delivery businesses or businesses that sell at trade shows or other events.
What Is a Merchant Account? It is a type of bank account that allows businesses to accept credit and debit card payments. To set up a merchant account, businesses must partner with a payment processor, which handles the transactions between the customer’s bank and the business’s bank. Contact 5 Star Processing +(888)-253-9692 for more information!
Frequently Asked Questions
Q1. Do you need a merchant account to accept credit cards?
Yes, you need an account to accept credit and debit cards. There are a few exceptions, but in most cases, you will need a merchant account.
Q2. Can you use a personal credit card to process payments?
No, you cannot use a personal credit card to process payments. You will need a merchant account for that.