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An Overview of Merchant Account Providers

3/13/2013 11:07:55 AM | by Anonymous

Merchant Banks

Merchant account providers offer financial accounts to businesses so retail and ecommerce merchants can accept credit cards and other convenient payment options from customers.


A credit card merchant account is a unique type of bank account that makes it easy for businesses in high risk industries or those with a poor credit history to accept and process payments. These days, paying for products or services via credit card is necessary to legitimize the business and ensure consistent sales growth. If a bank is unable or unwilling to work with a business, merchant accounts are a reasonable alternative.


Merchant acquiring banks typically work with merchant account providers or, in some cases, directly with merchants to establish credit card accounts for businesses. Sometimes a payment processor, a merchant service provider, or an independent sales organization is also a party to the merchant agreement, which allows the business to accept debit or credit cards.


Businesses often rely on merchant account providers to set them up to accept credit cards for transactions. Many companies are considered high-risk (either due to the specific industry, lack of retail experience, or poor credit history) and banks are unwilling to loan start-up funding or create a line of credit to allow for non-cash purchases.


In order for a business to accept plastic for transactions, the merchant account provider typically provides the merchant with a credit card terminal to process payments. The credit card terminal is a stand-alone machine that allows a card to be read by swiping the magnetic strip through the reader. Most credit card terminals also offer merchants the option to key-enter a customer’s credit card information for processing.


Every time a credit or debit card is swiped, there is a processing fee known as the interchange fee that goes back to the credit card company or bank that supplies the account. These fees depend on a variety of factors but typically hover around 2-3% of the transaction price. Rates are generally set by the major credit card companies like Visa and MasterCard and stay constant for all retailers regardless of industry or locale.


It’s also possible for merchant account providers to partner with a payment gateway that authorizes transactions for e-merchants and online retailers. Payment gateways accomplish the same task as the credit card terminals but the entire process is virtual. Usually, merchant account companies are separate from payment gateway companies, but in some cases, a merchant account provider owns and operates a payment gateway for all e-commerce clients.


Merchant account providers like High Risk Pay offer merchants the opportunity to accept credit cards for transactions, boost customer satisfaction, and streamline payment solutions for business.


Author Bio: Rich Hinckley is an analyst with High Risk Pay, a merchant account provider that assists small businesses owners with obtaining a merchant account, even if they have bad credit.

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