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A Merchant Account is Crucial

Whether you’re a traditional brick-and-mortar business or an Internet start-up, it’s unlikely that you’re able to do business without accepting credit and debit cards from customers as a means of payment. New restrictions on the amount of money that major credit card companies are allowed to charge to merchants who accept debit cards are making it possible for consumers to use their plastic not only for major purchases, but also for everyday banalities like a cup of coffee or a cheeseburger, and credit card use will only become easier and more common as increased security and better technology come into play. Your merchant account is your connection to the banks that interface directly with credit card providers, so it’s very important that you maintain a good understanding of credit card processing and the mechanism of merchant accounts.

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Merchant Account 101

To quickly review the payment cycle, the bank acts as a middleman between you and the credit card companies, debiting customers’ accounts and depositing money into your account to complete each transaction. Six steps that must be taken in order for a transaction to process fully: (1) the customer places an order in person or via the website; (2) the credit card processor receives the transaction and submits an authorization request to the credit card issuer, a bank; (3) the server approves or declines the request; (4) if approved, the merchant fills the order; (5) a settlement request is sent to your merchant account provider; and (6) the merchant account provider deposits money into your merchant back account.

When credit card transactions occur online, they are known as “card not present” transactions. This type of transaction is a greater risk to banks, which is why merchants who have both brick-and-mortar and online businesses are usually required to have separate merchant accounts for each. Banks take two serious risks when approving your business for an online merchant account. First, they must trust that you will faithfully fill your customers’ orders and not incur many chargebacks, or online refunds due to merchant error, and secondly they must believe that you will represent their name Visa and MasterCard also have their own criteria for merchant evaluation before card not present transactions are permitted. Our merchant account partner is available now to discuss your business needs. Find more information here.

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