Accept Credit Cards

How Merchant Accounts Work- This merchant account article by Best Internet Merchant Accounts will explain to you how merchant accounts work. The process how merchant accounts works is fairly simple so keep reading our how merchant accounts work tutorial.

A merchant account is necessary for directly accepting credit card payments, whether as a retailer or an etailer. As an Internet merchant, it is important to understand how merchant accounts work in order to make good choices.

Merchant Account Basics

Merchant accounts are a system that allows cashless commerce and is centered around an account at a bank through which payments are routed for credit or debit card payments made either at storefronts, with offsite service people, or over the Internet. The traditional merchant account is the set-up that uses a Point of Sales (POS) terminal to allow credit cards and/or debit cards to be swiped. The mechanism is, obviously, different online, where no physical card comes into play. When accepting cashless payments over the Internet, both a merchant account and a payment gateway "the authorization method for online transactions that takes the place of a POS terminal"are needed. They can be obtained separately or in combination.

Separate or Joint?

Using a separate merchant account and payment gateway gives you the flexibility to choose each for the features you want and to suit the various charges to your needs. However, for those who don’t have either have not yet had the opportunity to build up a business credit history or whose business level does not warrant the two separate accounts, it is possible to opt for a combined account that is similar to a merchant account and payment gateway combination, such as those offered by PayPal, Google, 2Checkout.com, Digital River, Alert Pay, TrialPay, and E-junkie.

The Merchant Account Process

The process begins when a customer moves through the checkout process and proffers payment via a credit card or debit card. The website uses a payment gateway to submit the transaction securely to the business’s merchant account, which in turn submits it to the credit card management group known as the Credit Card Network. The Credit Card Network passes the fund request to the financial institution that issued the customer’s credit card, which returns an approval or denial for the transaction to the Credit Card Network. The network passes the decision back to the merchant account bank, and from there it is routed back to the payment gateway, where it is recorded and passed on to the customer and the merchant.

In the case of a positive response, the settlement process is underway even as the answer is en route. The financial institution attached to the customer’s credit card forward the funds needed to over the transaction to the Credit Card Network. The Credit Card Network passes them on to the merchant’s bank account, where they arrive generally within two to four days of the transaction. Simultaneously, the charge is added to the customer’s credit card account to appear on the next monthly statement. When the statement is paid, the financial institution that issued the credit card is repaid.

Merchant Account Fees

Merchant Accounts earn money by charging a variety of fees. There may be a monthly charge; a transaction percentage fee, with the percentage based on the amount of the total monthly sales (you pay a lower percentage when your sales are higher); a per-transaction fee; an annual compliance fee for PCI (Payment Card Industry) standards compliance; a fee for a paper copy of your statement; a chargeback fee; fees for authorization attempts; and more. In addition, there may be different levels of service with different fee schedules.

Because there can be multiple fee hierarchies within a single institution and because some institutions do not clearly indicate their fees until you’re on the brink of signing up, it can be difficult to compare, but it is nevertheless important to do so, because differences in charges can be significant.

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