merchant account

A merchant account allows a business to accept credit cards, debit cards, gift cards and other forms of electronic payment. This is also widely known as payment processing or credit card processing.

Merchants, or business owners who receive payment for their goods or services, must apply for a merchant account. The merchant account may or may not be established based on several factors of which risk is the most important. Merchants who own businesses with poor or no credit may find it difficult to establish a merchant account.

Rates and fees

Merchant accounts are not free and fees are charged whenever a merchant processes a credit card for payment. These fees vary amongst providers but all fees are based on something called Interchange. Interchange are the base rates dictated by Visa and MasterCard from which all merchant account providers mark up their rates.

Interchange is made up of varying tiers. These tiers describe costs for different kinds of credit cards when processed under different kinds of circumstances. For example, a check card costs less than a consumer credit card which costs less than a business card. The method of how a credit card is processed changes which tier of Interchange is applied. For example, a swiped credit card costs less to process than one keyed into a credit card terminal.

The most common rates that affect merchants are mentioned below.