- Merchant Account
Choose an e-wallet for multiple payment options and value-added services in a single merchant account.
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What is a Merchant account?
Business owners face rising costs, low productivity, and low conversion rates when scaling a business. After all, processing payments in new markets can be complex and time-consuming. Therefore, after the site or online store is created, the target audience and sales channels are found, take care of accepting payments. Internet commerce has been developing very rapidly in recent years, and with it, interest in simple, reliable, and secure methods of accepting payments is growing. Often, customers of online stores, active users of gaming and dating sites, forex brokers, and online casino visitors prefer to pay for “purchases” with a bank card. To receive payments in this way, there is a merchant account. Here we will analyze how a merchant account works. What are the types and risks of merchant accounts? And how can you open a merchant account?
The Definition of Merchant Account
A merchant account is a special commercial bank account that accepts non-cash payments using Visa, MasterCard payment cards, and other issuers. When a customer purchases, the merchant account provider holds the money before transferring it to the company's checking account. Any refunds or cancellations associated with the transaction will be deducted from the trading account before the money is transferred.
Companies that accept payments on the site are issued an identification number, thanks to which you can automatically transfer funds from customer cards to the company's account. The number is linked to the company's bank account, and after the buyer clicks the “Pay” button on your website, the money debited from his card will be sent to the merchant account. The acquiring bank will automatically regulate their transfer to the account of the seller company. To process customer payments, it is necessary to conclude a contractual relationship between the company, the bank, and the payment card processing centre.
How do Merchant Accounts Work?
By opening a merchant account (or the so-called merchant account), you receive from the bank the right to independently withdraw money from your customers' bank cards. After simple actions, the money from the client's card goes to your merchant account in the acquiring bank. After accumulating a certain amount, the funds are transferred from the merchant account to the company's current account.
According to the rules of Visa and MasterCard card organizations, the merchant's bank (providing the merchant account service) is fully responsible for the merchant's chargebacks. The bank gives you a tool that allows you to withdraw money from customers' cards in an unlimited amount, relying on your honesty. Your bank is responsible to the client for unreasonable withdrawal of money by you.
The Cost of Merchant Account
Surely, using merchant accounts has its cost and fees for users. It is important to know the cost and amount of fees are linked to the volume of card transactions. Users take funds from their payment cards annually and will be provided with lower rates. Usually, there are two main costs for users when they make transactions via merchant accounts; monthly charges and the cost for each transaction. For instance, with debit cards, users should expect charges for each transaction with a rate between 0.3% to 1%. However, with virtual terminals, users should make a monthly payment of £10 to £20. Additionally, depending on the providers, merchant accounts can require specific fees or charges from clients because of special services or features. Further, we mentioned three main costs for merchant account holders.
- PCI compliance
PCI Compliance is a set of data security standards that requires the tokenization of payment information and business protection through fraud prevention measures. This simply means that the cardholder data stored by your company, including names and card numbers, will be safe. The merchant account provider can offer users such features for additional monthly fees. We advise all users to take this feature and make their transactions as secure as possible.
- Chargeback fees
This is a procedure for the forced return to the buyer of funds previously withdrawn from his bank card. They are used to protect consumer rights. The buyer has the right to initiate a charge-back procedure if the seller fails to fulfil its obligations or illegally withdraws funds. This encourages the seller to supply quality goods and services, not to abuse their rights, and to fulfil their obligations. The number of chargebacks directly affects the cost of processing. You can reduce the number of chargebacks by providing quality goods and services and organizing a simple procedure for a reasonable refund.
- Interchange fees
Interchange fees are a cost that is mandatory for all merchant account holders to pay. It is the fee that a merchant’s bank pays to the customer’s bank to form part of rates, also discount rates to use their name. It is important to remember that interchange fees are not negotiable and that all merchant account holders must be charged.
The Merchant Account Types
Merchant accounts have three main types for clients. Each type provides users with specific services and features. Below, we briefly mention every kind of merchant account and its key features.
- Aggregated merchant accounts
The aggregated merchant accounts count as the best choice for small businesses. Such service is provided by a payment intermediary that hires trade makers in place of acquiring banks. When users join such merchants, their businesses gain specific codes according to their products and industry. Other companies with the same features will be combined as one category. As soon as the transactions between merchants are linked, the payment intermediary can manage the same low rate for small businesses as the huge companies. The main negative point about aggregated merchant accounts is that users have less control over their money. However, users can gain better rates by using Dedicated merchant accounts.
- Dedicated merchant accounts
A dedicated merchant account is managed and set up directly by acquiring a bank. Users can negotiate for better rates, and such merchant accounts allow users to have more control over their funds.
- High-risk merchant accounts
High-risk companies find it more difficult to open bank accounts, as the process of identification and due diligence takes longer and requires the provision of many documents. The cost of opening a merchant account for a high-risk business will always be higher. If your business is in the high-risk category, we recommend using expert support to open accounts. This will reduce the risk of failure and get a working financial instrument that fully meets the company's needs. Before opening a merchant, the heads of high-risk organizations ask themselves whether it is worth going through this procedure. There are several benefits that you can personally appreciate after undergoing the procedure. Thanks to a merchant account, it will be possible to simplify the acceptance of payment and make the process safe. Here, we mentioned to main features of high-risk merchant accounts:
- The client can quickly pay for the goods on the Internet using a bank card. It will not go to customers who offer this payment option.
- A high-risk seller can accept money for services or goods from any country.
- Round-the-clock service. A person can make a payment at any time. He will not have to focus on the opening hours of banks or an organization offering goods.
- Ease of dealing with clients. Thanks to a merchant account, you can accept payments quickly. A person only needs to enter the bank card details and confirm the payment. After that, the high-risk seller will receive the money to their account attached to the merchant account.
The Best Way to Create a Merchant Account
To open a merchant without any problems, you need to carefully analyze your business model and choose the best jurisdiction for doing business. A merchant account is opened exclusively for a legal entity that meets several requirements:
- The presence of a current account to which money will be received from the merchant, this type of account is not used for storing funds, only for processing,
- You must fully disclose to the acquirer information about the ultimate beneficiaries of the company,
- The package of statutory documents of the company must be duly certified,
- If the company is not new, its credit history must be impeccable.
Additionally, the web resource through which the company operates must meet certain requirements; it must be on a paid hosting, and all its pages must be in the same domain zone.
A Merchant Account for Small Businesses
As a small business, you can easily open a merchant account. However, you should choose the best provider for your needs and transactions. In this regard, it's better to research different merchant account providers, compare their features, and choose the most convenient one. Each provider offers a different pricing schedule, counteract terms, and costs that must be reviewed before opening the account. By choosing the best provider for your business, the only thing remaining is to provide your business name, tax, and contact information for further procedure.
The International Merchant Account
All small businesses that want to achieve regional and international profits must open an international merchant account. Such accounts allow companies to accept international payment methods, such as debit and credit cards, from all customers worldwide. With a global merchant account, users can think about expanding their businesses and be more effective in the international community.
Thanks to improvements in the sphere of technology and electronics, we are currently facing a huge opportunity for a more convenient future, especially in finance and banking. Managing a new business in a new community in this modern time needs specific tools and features. In this article, we wrote about merchant accounts that can make life easier for small and huge businesses. Merchant accounts are a safe bridge between businesses and bank card providers that customers use to make purchases. As mentioned, merchant accounts require businesses to partner with merchant-acquiring banks that make all settlements for companies. They allow their customers to pay by credit/debit cards and electronic payment cards quickly and immediately. By reading this article, we believe all types of businesses can understand the importance and use of merchant accounts, available types, and their specific features.
Common Questions About Merchant Account
The merchant account is a bank account designed and created for businesses. It allows companies to accept payments via credit/debit cards or electronic wallets from customers in a secure environment.
In this regard, you need to follow seven main steps:
- Get a license for your business
- Open a business bank account
- Understand your needs
- Make a research about providers or read our blog post to save your time
- Submit your application
- Provide supporting materials
- Get approved.
Yes. In this case, users only need to connect their online merchant accounts to their business accounts and make or transfer money with them. However, currently, some electronic wallets, such as a PayPal business account, allow users to link their online merchant account directly to their bank accounts.
The merchant account can provide businesses with benefits such as; accepting credit cards, increased sales, better money management, avoiding bad checks, and customer convenience.
The cost can be between $10 to $30, which can count as a statement, monthly, or account fee.
Users should enter their merchant account provider website, choose the deposit/cashier option, and select the withdrawal. After that, users can see available withdrawal options. Users can submit their withdrawal requests by choosing the most convenient payment method, providing the required details, and reviewing all details.
To sell online and be able to accept payment from customers, having a merchant account is necessary. A merchant account will link customers who want to make payments to a payment gateway to manage their necessary transactions.
Even an individual needs to open a business account to be able to open a merchant account.
Depending on the type of business, credit score, tax information, and all company activities.
A high-risk merchant account means that your payment processor has stated your business has a high risk of fraud or chargebacks.
Merchant is the term that means payment processors referring to their customers. The business can accept payments in person, online, or over the phone.
A merchant identification number known as “MID” or merchant number is the unique number for each business that can process credit card payments more easily. To transfer money to a merchant number, users should write the MID of their accounts as the receiver in any payment method they use.