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What is a merchant account?

Posted by Alex Neir on Mon, February 07, 2011 @ 05:12 PM
What is a merchant account

What is a merchant account?

A merchant account is a financial vehicle that lets you accept payments from someone else. The three important factors to understand about a merchant account are as follows:

A merchant account is….

  • Underwritten by a financial institution
  • Allows you to accept payments
  • Is a line of credit

A merchant account is underwritten by any number of financial institutions. Most major banks have the capability to set up a merchant account. However, most banks will actually refer the account to a licensed merchant service provider (MSP) or independent sales office (ISO). The reason; most banks see their core competency outside the merchant services area and will refer your business to an expert (for a commission, of course). An MSP/ISO is an institution that establishes relationships with a network of credit card issuing banks and credit card associations (Visa, Master Card, AMEX, etc) for the purpose of processing payments. In addition most MSP/ISO organizations offer many other services such as fraud detection, fund remittance, detailed reporting and customer service.

A merchant account allows you or your business to accept payments. Payment acceptance can be in the form of credit and debit card payments, automated clearing house (ACH) payments, and electronic check payments.

A merchant account is a line of credit. The reason a merchant account is a line of credit is a function of the liability that charge backs create.

If you are considering opening a merchant account please refer to – 7 items to consider with an affordable merchant account.

*Image provided by Andres Rueda

Tags: What is a Merchant Account, Why Is A Merchant Account A Line Of Credit, Chargebacks