What is a Merchant Account? Guide for New Small Business Owners

Wednesday, June 8th, 2022

As a small business owner, you know it’s important to be able to accept credit card and debit card payments. But how to go about it can be confusing. The ability to accept credit and debit card payments requires a merchant account, but how and where to obtain one is rarely simple and straightforward.

According to the Bureau of Consumer Financial Protection, an estimated 66 percent of the 255 million U.S. adults had a credit card in their name in 2018. In light of this, it’s understandable why so many new business owners place securing merchant services as one of their top startup tasks.

What Are Merchant Services?

Essentially, merchant services encompass everything from hardware to software that is needed for businesses to accept and process credit or debit card payments from both online sales and in-store. A merchant account plays a key role in this. This type of bank account allows businesses to accept payments by credit or debit card.

A merchant account acts as an agreement between your business, a merchant bank, and a payment processing provider. Once you have an account, the payment processor does the busy work of keeping up with the issuing and acquiring bank to process each payment. It’s important to keep in mind that not all merchant services are created equal. There are different types of merchant services to compare to ensure you choose the right one for your business.

• Credit card processing. As mentioned, credit card processing services allow merchants to accept debit and credit card payments. There will be different fees involved depending on the method of processing, credit card merchant services, your business type and industry, and the processor you choose.
• POS solution. A point-of-sale system is hardware and software that enables your business to make sales at your physical counter. You are able to accept payments, track sales, offer a loyalty program, manage your team, and much more. It boosts efficiency by combining many capabilities in one central spot.
• ACH. Automated clearing house is a financial network used for electronic payments that allow sellers to transfer money from one bank account to another. They are most commonly used for checks, but they can also be utilized in the place of wire transfers and cash.
• Virtual terminal. Virtual representations of credit card terminals, virtual terminals allow you to accept transactions using a computer instead of a physical card reader. It allows you to itemize sales, create one-time payments, recurring payments, etc.

All in all, using merchant services allows you to expand your business and customer base beyond cash buyers. In an increasingly digital world, this ability is not only essential but also an opportunity. The key is to compare providers, choose one that understands your business type, and compare fees and features.