Merchant Account

When a business, organization or a nonprofit wants to have the capability to accept credit cards, debit cards, gift cards and other forms of electronic payment for products and services directly from customers, it must establish a merchant account.
From the traditional local Mom-and-Pop shops, through all types of mainstream small businesses to the biggest department stores and retail chains, all organizations that want to take credit cards must setup their own merchant account with a service provider.

It’s a business and financial arrangement which is established with a payment processor and includes a bundle of services, hardware and software that automates the process of instantly accepting card information and transferring funds to the merchant.
Figuratively speaking, it’s a kind of a very sophisticated technological pipeline that carries the customers’ funds from their credit cards to the retailer’s bank account.

When a customer swipes his debit card at a physical point of sale or fills out credit card information on a website, a payment gateway bundles and approves the transaction.
Then, right after the transaction has been successfully authorized, the money is electronically transferred into a holding account with the merchant account processor.
From there, the money is securely transferred to the merchant’s designated bank account.
Bottom line: this important solution enables businesses to offer customers fast, flexible, reliable and secure options for making offline and online payments conveniently.

Merchant Account Types

The payment processing industry, classifies merchants into 2 specific categories, which characterize how they collect and process credit card information and conduct transactions.
Generally, there are two main merchant account types, which are called “Swiped” and “Keyed”.
Under each classification, there are numerous ways of processing that information.  

“Swiped” or “Card Present” type merchants interact with their customers directly, face-to-face, usually in a ‘brick-and-mortar’ retail oriented environment and capture card information by physically swiping cards “over-the-counter” through a terminal or traditional point-of-sale system (PoS).
The customer’s signature is then captured on the terminal or simply on paper.

This group includes retail businesses, restaurants and bars, wireless and mobile merchants, lodging and hospitality merchants, etc.
These kind of accounts generally enjoy the lowest rates and transaction fees, since the customers’ credit cards are physically present at the point of transaction and the risk of having a transaction being returned or canceled is pretty minimal.

“Keyed or, “Card-Not-Present” merchants indirectly collect their customers’ card information, which means that neither the card nor the cardholder are present for the sale.
The group mainly includes mail order / telephone order merchants (commonly known as MOTO) as well as internet and ecommerce retailers, who take their orders online, through a website which utilizes a secure shopping cart and an internet payment gateway service.
Merchant accounts for businesses of this nature generally carry a higher cost due to the increased risk which is naturally associated with the lack of face to face interaction with the card holder.

Common Merchant Account Owners

• Traditional mainstream retailers, small businesses as well as medium sized and large merchants that operate on a local or nationwide basis.
• Mail or phone order based businesses, call centers, telemarketing companies and home based business owners.
• Online stores, ecommerce websites, eBay sellers, providers of digital goods and web hosting companies.
• Non-profits, donation and charity organizations and churches.
• New businesses and startups.
• Collection agencies.
• Credit repair companies.
• Travel agencies.
• Mobile phone based businesses (iPhone / Android).
• Law firms.
• MLM
• High risk industries.
• Bad credit businesses.

Application Approval Time

Obtaining a merchant account may take some time, which varies from one broker to another.
However, with some providers the process can be quite easy, quick and hassle-free.
Some third-party, non-bank merchant service companies offer extremely fast approvals, meaning on the same day you submit your application.
After being approved, the setup process can also be quite quick and easy.
Many credit card processing companies offer quick deposits, usually within 48-72 hours. However, some processors have even faster turnaround time and can offer faster access to the money with next day funding.