Merchant accounts are used to accept payments from customers and process credit card transactions. Any company that sells products or services via the Internet, telephone or any credit card terminal must establish a merchant account with a financial institution for the purpose of managing and retrieving credit card information and any form of electronic payments. For online credit card processing, it is essential for businesses to establish merchant accounts. Credit card processing involves verifying all required information and transferring payment to the company. All required information needed to access the issuing bank and the account is stored on the magnetic strip, which is on the back of the card. When the information from the credit card is retrieved, an automatic request is sent to the customer’s bank to determine whether the available funds are enough to cover the transaction. When the funds are available for transfer, the card is approved, allowing the funds to be placed on hold and withdrawn from the customer’s account.
Merchant account providers make money based upon their bank association fees and setup fees. When a company, such as a retailer, registers with a merchant account company, which may be a bank or an Independent Sales Organization (ISO), there is an application fee and yearly bank fees. There are also account activation fees, statement fees, and fees associated with each credit card transaction. Most merchant account companies require businesses to maintain a specific reserve amount in the merchant accounts. However, the terms and conditions and the amount of the fees associated with merchant accounts may vary with each company. Most retailers shop around to find the merchant account provider that offers the best services for affordable fees.
In addition to ongoing fees and conditions to maintaining a merchant account, the provider may also charge fees for any fraudulent transactions and other penalty fees. As far as the services of the provider, many business owners choose the best merchant account provider that offers reliable and secure transactions for the business and the customers. The approval rating, ease of use, and the quality of customer service are also important factors that business owners consider when setting up a merchant account.