What is a Merchant Account?

In this day and age, just about anyone can set up an online shop and sell their products or services to others. Thanks to the internet and the ease of ordering online with credit cards, it couldn't be any easier to shop online. As online shopping has progressed over the years, people are becoming much more accustomed to using their credit cards to order online and aren't as leery of it as was the case 5 years ago.

Merchant accounts are what make it possible for online businesses to accept these credit card payments. Not just anyone can accept a payment from a credit card. The payment first has to pass through a merchant account. In some cases, a small business may use a shared merchant account as in the case of Clickbank or Paypal. These shared merchant account providers accept money from sales and pay out the money earned twice a month. Shared merchant accounts make it easy for total beginners to accept credit cards, but it can create a cash flow crunch. Most serious businesses will have a merchant account of their own.

A credit card merchant account is set up with a bank where the business deposits their business income. When a sale is made, the money is credited to their business account at the bank. In order to qualify for a merchant account, the business has to pass a credit and fraud check. So even though it is possible to apply for and get a merchant online, it is still necessary to follow up with the required paperwork to make sure that the business is on the up and up.

Having a merchant account is a great advantage for an online business. Not being able to accept credit cards can really hurt sales, customers will likely go to a competitor where ordering is easier.

Having a merchant account entails paying the appropriate fees which are set by the provider. Commonly, a monthly fee will be paid in addition to a small per transaction fee.

When an online business gets a merchant account, it helps with cash flow since payments from orders get sent into their bank account as soon as possible. When using shared accounts, it can take as long as 2 to 4 weeks to get the money.

There are many advantages for obtaining a merchant account and very few disadvantages. A disadvantage might be if the business does a very small volume of sales which would make the merchant account fees prohibitive. Accepting credit cards is a necessity for businesses operating online today, and by having their own merchant account, businesses can have access to their money sooner and pay less in transaction fees.