A Merchant Account

What Is A Merchant Account?

The use of credit card is now fast becoming the favored mode of payment for all kinds of purchasing activities, not only in developed world but also in rising economies. There are 2 key factors contributing to this trend:

• Convenience and Security: Credit cards means that you do not need to have hard cash for high value purchases. It provides the convenience of remote purchasing and instant payment delivery. If we consider the pay orders or banker’s cheques, it involves extra fees, charges for delivery process and the logistical time lag. Credit Card gives various security features.
• E-commerce: If we consider the increasing prevalence of electronic purchasing options such as online Television and Telephone and increasing approval of the convenience factor, credit cards are appropriate and practical choice for payments.

Merchants Accounts are the accounts which allow receipt of payments through credit cards, debit cards and cheques. A dealer can get a merchant account with a bank or through a merchant account provider (independent) for mixed business entities. Different kinds of merchant accounts exist depending on needs of retailer and business nature. For example, for an Internet retailing business, you can use the merchant account, but for a mortar and brick retail business, a swipe based physical terminal is used. Merchant accounts are categorized as:

• Swipe based Merchant Accounts: Normally, this account depends on a physical terminal related to phone lines. The credit card requires to be swiped through this terminal to start, process and complete a payment operation. Check reader is available for check verification. The wireless merchant account terminal is an innovation in the swipe based processing segment. In this, phone lines are replaced by wireless connection using cell phone technology. The benefit of this technology is that a retailer or a merchant will not be restricted geographically for acceptance of payments. For example, a merchant can easily attain the retail exhibition without wires, a payment system for walk by clients to submit payments of credit cards.
• Non-Swipe based Merchant Accounts: In this category, the payment requires the credit card information but the card doesn’t require to be swiped. This also requires merchant accounts for online verification of payments and clearance. Common non-swipe merchant accounts are:
  • Internet Merchant Account: It is mostly used by Internet based retailers. For processing the credit card payments, first electronic credit card information is required. This information is received through a web based form and passing it through a payment gateway. This is the most popular merchant account, mainly due to the significant growth of the e-commerce industry.
  • E-Checks or Online Cheque Acceptance: This use cheque payment, no need to receive the cheques by mail. The customer can give the cheque information on the physical cheque including the depositor’s name, account name, cheque number and so on. The retailer can check and receive a check by online submission or email or phone/fax. Special software allows retailer to print the cheque remotely and submit it in physical form.
  • Telephone Order Merchant Account: This use the touchtone telephone to retrieve the credit card information using the telephone keypad. It is suitable for the telephone order businesses which have a large business coming in through the telephone.