What Is a Merchant Account Provider?
Merchant accounts allow business owners to process credit cards and electronic check payments, and merchant account providers supply the tools and services necessary to facilitate these services. Although a healthy relationship with merchant account providers can significantly boost a merchant's revenue, business owners must use caution in selecting a provider as services and costs can vary considerably from one merchant account provider to the next.
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Definition
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A merchant account provider, according to the payment processor ACH Direct, is a financial institution that offers merchants a specific payment processing account. Merchants may use the account to collect payments from customers' bank accounts or charge customer credit cards.
Function
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Merchant account providers accept applications from merchants seeking a way to process electronic payments. If the financial institution approves the merchant for an account, the merchant receives access to a credit card terminal or online interface designed to accept information about financial transactions like sales, voids and returns. The merchant account provider then acts as a liaison that relays the transaction information to the appropriate credit card network or the bank check automated clearinghouse.
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Services
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Merchant account providers offer a number of services in addition to processing credit cards and electronic checks. According to the credit card processing website Merchant Express, many merchant account providers offer voice authorization of transactions, automated settlement of funds into the merchant's bank account and online access to view and modify payment batches. Some merchant account providers offer recurring billing for subscription-based services, and others offer a full accounting suite that provides periodic reports for merchant records.
Costs
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Merchant account providers charge myriad fees in exchange for processing electronic payments. Credit card transactions, according to a comparison of providers offered by the web host company Host Gator, usually carry a charge of a few cents each plus a small percentage of the transaction amount. Account providers may also charge a monthly gateway fee that covers the expense of relaying transactions to the credit card networks and check clearinghouse, and some may charge a fee for providing monthly statements. Other common fees include application fees, charges for programming credit card terminals or setting up online interfaces, setup fees that cover initial setup of the merchant account, compliance fees for verifying observance of required privacy rules and monthly minimum processing charges.
Benefits
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Merchant account providers benefit business owners by providing the equipment and services necessary for processing credit card and electronic check transactions. According to Merchant Express, adding the ability to accept credit card payments can triple a merchant's income, and the accounting services that some account providers offer help streamline monthly reporting.
Considerations
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Despite a number of advantages, business owners must exercise caution when selecting a merchant account provider. Fees vary considerably from provider to provider, according to Merchant Express, and services also vary. In addition, some merchant account providers charge minimum fees and considerable monthly service charges, and these costs can quickly eat into a merchant's revenue.
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References
- Photo Credit credit card terminal image by Igor Zhorov from Fotolia.com
