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How Credit Card Merchant Accounts Work?

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Credit card merchant accounts are perfect for accepting credit cards and bank debit cards online or by phone. Some small retailers are hesitant to apply for a merchant credit account. To utilize this service, merchants must pay a small fee, which is usually a percentage of each individual transaction. However, if merchants were to look beyond the additional fees and focus on the bigger picture, they will come to realize that a credit card merchant account could potentially double their business. Why? For starters, many consumers have traded in cash for debit cards. As a result, many buyers will bypass "cash only businesses," and shop with a retailer who accepts major credit card payments.

Who Can Apply for a Merchant Credit Card Account?

Many companies offer credit card merchant accounts. Getting a merchant account is simple, and most businesses are approved. These include big retail chains, mail order companies, telephone sales companies, internet based companies, and home based businesses. Moreover, small business owners operating internet or home based businesses can obtain a credit card merchant account regardless of their individual credit history.

Merchant accounts primarily allow business professionals to accept payments with Visa, MasterCard, or bank ATM's. However, merchants may also elect to accept American Express and Discover card payments. Each merchant credit account holder varies in their setup charge. In some instances, merchants may have to pay an additional $50 or so before they are eligible to accept American Express or Discover card payments.

Fees Associated with Credit Card Merchant Accounts

Because credit card merchant accounts are convenient, and could perhaps boost business revenue, companies that offer merchant accounts charge retailers a small fee per transaction. Fees vary depending on the credit card and merchant account holder. However, the typical fees for Visa, MasterCard, bank debit cards, and Discover cards are 2% of the sale price. American Express fees are a little higher. On the other hand, some merchant account holders do not charge a percentage fee. Instead, retailers are assessed a flat fee per transaction.

Acquiring Funds from a Merchant Account Holder

Although merchants or retailers do not collect immediate funds, the merchant account holder will usually deposit the money into their company checking account within two business days. Before funds are deposited, fees for using a credit card merchant account are automatically deducted. To keep track of all transactions and deductions, merchants will receive a monthly statement from the merchant account holder.

Applying for a Credit Card Merchant Account

The easiest and simplest method of applying for a merchant account is online. Once an online application is approved, the merchant account holder may mail a hard copy application for the merchant to sign. Before applying, it helps to research different account holders. Each company establishes their own set of rules. For example, some will charge an initial setup fee, application fee, etc, whereas other merchant account holders offer free application, setup, software, and collection services. On average, merchant account applications are approved within 24 to 72 hours.

Published: 2006-04-09
Author: Valencia Higuera

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