The merchant account is a kind of financial institution that helps businesses to accept credit card payments for their products and services.
It’s an important part of the business world, especially if you are planning to start your own online store or e-commerce website.
If you don’t have one yet, then it might be time to get one because this will make your life easier when it comes to accepting credit cards as payment methods on your site.
In this article we shall discuss what a merchant account is, and how to obtain one. So, let’s get to it!
What Is A Merchant Account?
Merchant accounts are also known as “merchant banks” or “payment gateways”. They provide access to bank accounts in order to facilitate the transactions between merchants and customers.
The main purpose of these accounts is to help small businesses grow by reducing costs and increasing efficiency.
Merchants can use their merchant account to process credit card transactions through third party websites like PayPal, Google Checkout, Amazon Payments, etc.
These companies charge fees for processing the transaction but they do so at a lower rate than what banks would charge. This means that you can save money while still being able to take credit card payments.
How Does A Merchant Account Work?
To understand how a merchant account works, here are some things you need to know:
- A merchant account is not a bank account. It doesn’t give you any cash back from your sales. Instead, it allows you to receive funds from your customers via a third party company.
- The merchant account provides you with a gateway which connects you to the customer’s bank account. You must pay a fee every time someone uses your service.
- When you set up your merchant account, you choose which type of bank account you want to link to. For example, you may decide to link to a checking account or a savings account.
- Once you have linked your merchant account to your bank account, you can send out invoices to your customers. These invoices include information about your prices and terms of sale.
- Your customers can then pay you using their credit cards. After they complete the purchase, they will enter their billing address and select the option to pay with a credit card.
- As soon as your customer pays you, the amount will appear in your bank account.
- If you want to withdraw more money than what was deposited into your account, you can sell your goods or services to other people.
- In case you want to keep track of all your transactions, you can download reports from your merchant account provider.
- Finally, you should always check whether there are any pending charges before sending out invoices to avoid getting charged extra fees.
How To Get A Merchant Account
Now that you know what a merchant account is and how it works, let’s talk about how to get one.
There are two ways to go about it – either you can apply directly to an established merchant account provider (MSP) or you can start your own business and open a merchant account yourself.
Applying Directly To An MSP
If you already have a website, you can easily find a reputable MSP online. To make sure that you’re dealing with a legitimate company, look for reviews on sites such as Yelp and Google+.
You can also ask your friends and family if they’ve used this particular company. If possible, visit the office of the MSP.
You’ll be asked to provide them with proof of identity and a copy of your business license. Once everything has been verified, you’ll be given a contract to sign.
This contract will outline the terms of your agreement with the MSP. In addition to these terms, you’ll also be required to pay a monthly fee. The exact amount depends on the size of your business.
Starting Your Own Business
If you don’t have a website yet or you just want to try something new, starting your own business might be the best way to go. However, you’ll first need to register your business name with the local government.
After registering your business name, you’ll need to file a DBA application with the state where you plan to operate. This document allows you to use your business name legally.
Next, you’ll need to create a business entity. Depending on the state you live in, you may have to pay a small fee to do so.
Once your business entity has been registered, you’ll need to open a business checking account with your bank. You’ll also need to open a business savings account.
The purpose of the savings account is to hold money that you won’t spend right away. It’s important to remember that banks usually charge higher interest rates when compared to other financial institutions.
The main reason why you’d choose to open a business checking and savings accounts is because they offer better security features. For example, they both come with debit cards which can be used anywhere Visa is accepted.
When opening a business checking account, you’ll need to submit a business tax return along with a copy of your DBA registration. After submitting all the necessary documents, you’ll receive a letter confirming your approval.
In order to avoid any problems, it’s recommended that you keep track of every transaction made using your business checking and savings accounts.
To sum up, a merchant account is a way for businesses to accept credit card transactions without having to deal directly with the banks.
With a merchant account, you can process payments from customers who wish to buy products and services through your website.
Merchant accounts are essential tools for e-commerce businesses. They help increase sales while providing additional benefits such as fraud protection and customer support.
Merchant accounts are not only beneficial for brick-and-mortar stores but also for online retailers. If you’re looking for a reliable merchant account provider, then you should consider working with an MSP.
Find out more on how merchant accounts work at our credit card processing knowledge base.
Paul Martinez is the founder of EcomSidekick.com. He is an expert in the areas of finance, real estate, eCommerce, traffic and conversion.
Join him on EcomSidekick.com to learn how to improve your financial life and excel in these areas. Before starting this media site, Paul built from scratch and managed two multi-million dollar companies. One in the real estate sector and one in the eCommerce sector.