How Do Merchant Accounts Work

How Do Merchant Accounts Work

What is a Merchant Account?

To answer the question, “How Do Merchant Accounts Work ?”, you first need to know what they are. A Merchant Account is a bank account specifically for business owners. It gives customers the option of credit or debit card payments by transferring the funds of sales and depositing them into a business bank account. If you’ve ever been curious as to where your funds go after you swipe your card, they are processed by a merchant account and deposited to the merchant’s bank for safekeeping.

What Kind of Merchant Accounts Are Out There?

Retail Merchant Account | How do Merchant Accounts Work


Retail department stores, specialty shops, and all other brick & mortar businesses all fit best with a retail merchant account. The benefits of this type of merchant account are lower transaction processing fees. The physical hardware of some variety will always be required because transactions are processed in person by swiping or inserting the card into a card reader, however it is possible in some instances to get a free credit card terminal. Some retail merchant accounts also have the availability to accept electronic checks as payment methods and to collect digital customer signatures. Most processors ask for a minimum of 70% of store sales processed in person as a requirement for acceptance of this type of account.

e-Commerce Merchant Account | How do Merchant Accounts Work


Retail merchant accounts require a stationary physical store location, but this type does not! An online merchant account processes payment through a safe, encrypted page where customers manually enter credit card information. Due to the challenges of fraud and online order fulfillment like shipping and delivery, e-commerce transactions are riskier for both merchants and processors. This risk results in higher transaction fees than retail merchant accounts when cards are accepted face to face. A typical e-commerce business will use a payment gateway to connect their merchant account to their website’s shopping cart. However, other merchants, such as a doctor or attorney, may use an online merchant account too. They invoice their patient or client with a link to pay their bill online. Non-profits can add a “donate now” button onto their website and government agencies can also opt to collect tax payments online.

MOTO Merchant Account | How do Merchant Accounts Work

Mail Order / Telephone Order (MOTO)

Some businesses need to accept credit card payments remotely but don’t necessarily want to allow payments through their website. In which case, a MOTO merchant account is a great choice. This is the most attractive option for companies who have a high percentage of home shopping customers or advertise through infomercials. When the customer calls in to make a payment over the phone, the company representative manually key-enters a customer’s card information into a physical terminal or online company computer system. Other businesses, such as mail-order catalogs may have credit card forms that are mailed in and then manually processed by employees who key-enter the credit card information. Other businesses that haven’t yet gone paperless may still require their customers to fax in a credit card authorization form before performing work. The key element of this type of merchant account is that the sale is prompted by a company representative typing in the credit card data rather than a customer typing it into a webpage online.

Why Use a Merchant Account?

Convenience, Safety, Trust, and Higher Revenue. Any type of business and any type of customer can benefit from a merchant account. Most people today prefer to use debit and credit cards because it’s easy and it saves time. Merchant accounts give both customers and business owners the peace of mind in knowing that funds are transferred securely. Customers recognize and trust the card brand symbols Visa, MasterCard, Discover, and American Express. When these symbols are displayed on a store window or marketing materials, this gives consumers confidence that they are dealing with a legitimate business which lends credibility to the company. With such benefits, most businesses will see a significant and immediate increase in sales when they start accepting credit cards.

How do Merchant Accounts Work: Additional Information

Now if someone asks you, ” How do merchant accounts work ?” you can tell them. For more information on how do merchant accounts work and which one might work for you, please visit:

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