Merchant Account Meaning

Merchant Account Meaning In Detail.

What is the meaning of a merchant account? What is the definition of a merchant account? What exactly is a merchant account? These are some common questions that we usually get from our global clients. In this detailed article, we will let you know about the meaning of merchant account.

A merchant account is a particular purpose bank account. Businesses can accept credit and debit card transactions using the merchant account. Merchant accounts are of two types. Online merchant account and Retail merchant account. The Financial Institutions that offer these accounts are merchant acquiring banks or PSP. Businesses that accept payments online are also known as Internet Merchants. Companies can receive credit card payments online or through a virtual terminal. The acquiring bank charges a monthly fee for the maintenance of the merchant account. The Payment Gateway transfers the payment information to the card issuers infrastructure. Card processors receive the response of the transaction through the payment gateway. This information also goes to the merchant’s website. Small Businesses, Brick and mortar stores and E-Commerce sites all use merchant accounts.

To get a merchant account, the business owner needs to apply with the PSP. The business owners need to send a filled merchant account application. They also need to submit the KYC documents. Processing companies work with different Card issuers. Card issuers can be banks or credit card companies. Some card issuers may require separate approval. Card processors charge a per transaction fee. It is the MDR. The full form of MDR is merchant discount rate.

Retail stores use point of sales devices or POS terminals for Credit Card processing. Payment processors offer online payment facility to businesses after strict underwriting. Card issuers allow cardholders to raise disputes. Customers raise disputes if the product is not received. Payment processors are very vigilant about the chargebacks. Every processor monitors each account for the spike in the chargeback ratio. Business owners must maintain their account under a specified chargeback to sales limit. Most merchant banks close accounts for high chargebacks. If merchants face high chargebacks, then they may need services of high risk acquiring banks. Businesses can also use alternative modes of payment processing. Companies in the US use ACH payment processing as an alternative to card processing.

To get an online merchant account businesses must follow processors requirements.

  • The website must display the DBA, Contact email, Phone number and address of the company.
  • Merchant must ensure that the website is ready before applying.
  • The website must have an SSL Certificate.
  • The Content on the website must be genuine. We have seen many applications fail because of copied website content.
  • The logos of the credit card brands should appear on the website.
  • The DBA or the name of the company should also appear at prominent places on the website.
  • If the merchant sells tangible products, then the merchant must share a supplier agreement with the processor.
  • The type of bank account needed to get a merchant account is a business bank account. Most processors refrain from wiring funds to the personal account.

We hope that now you are clear about merchant account meaning. To get more details about our services then send us an email on [email protected]