Introduction to Merchant Accounts And How They Work

Tuesday, January 30th, 2018

Why do businesses need Merchant Accounts? Every company requires a merchant account mainly to help them take card payments.

Being able to accept credit cards is a big plus, whether you’re new in business or have been trading for some time. If you have to receive payments in the form of cards (whether in-store or online) getting a merchant account should be your first step.

Here’s the guide to what merchant accounts are and how they work.

What’s A Merchant Account?

This is, in essence, a particular bank account that allows your company to take card payments. It temporarily holds your finances before they are finally transferred to your business bank account. Merchant accounts are issued by “acquiring banks,” but may also be obtained as part of a Payment Service Provider’s package.

Owning and making good use of an internet merchant account UK ensures security for both your business and customers. Meaning your firm enjoys safer credit & debit card transactions, plus you can check to see if a consumer has adequate funds within their account before permitting payment.

After a transaction is complete, funds are deposited into your business merchant account. This money is automatically transferred to your business bank account without any charges in 2 to 7 days.

Dedicated Vs. Aggregated Merchant Accounts

Discover the two types of merchant accounts businesses can choose from:

Dedicated Merchant Accounts

They allow firm owners better control of their money because they’re specifically designed for micro-businesses. Dedicated merchant accounts also allow their owners to discuss custom rates depending on the product type and volume.

However, you won’t easily qualify for a dedicated merchant account because of the thorough underwriting process.

Aggregated Merchant Accounts

While dedicated merchant accounts are created purposely for one business, aggregate merchant accounts retain your transaction finances in a shared pool together with several other companies.

Though you’ll still be directed to give some personal and business-related info, getting aggregated merchant accounts is a more straightforward process than going for dedicated accounts.

Regrettably, you won’t be well-placed to negotiate rates and have full control over the span within which you process and obtain your money.

Card Transaction Processing

Transactions have to be completed to have the money moved to your merchant account. Luckily, today almost all transaction processing methods are conducted electronically.

Here are the three things a business owner needs to accept credit/debit card transactions:

1.  A Merchant Account –where the transactions are paid.
2. A Payment Gateway –an online service that safely transmits card details for verification and fraud checks. Also debits the amount payable from the customer’s account to your merchant account.
3. A card terminal or online shopping cart – For online payments, you’ll need shopping cart software to take consumer orders and convey them to the gateway. All face to face in-store transactions requires that you have a physical card terminal. And finally, for telephone transactions, you need a virtual terminal.