Merchant Accounts 101

Merchant accounts are accounts that are obtained through a bank, or associated organization that allows merchants the ability to accept credit card payments. Having a merchant account is critical in today’s card driven economy and essential if you wish to participate in e-Commerce. You can visit this website to explore what types of businesses and costs are involved with ecommerce providers. Merchant accounts give your customers additional, more flexible ways to pay which can greatly increase revenue for your business.


When a merchant accepts a credit card as payment for a good or service the credit card machine or computer will collect vital information to ensure the card is valid, much like checking to make sure a dollar bill has the correct components. The information (card number, expiration date, card security number) is electronically sent to the appropriate card network for processing. Most commonly after the information is submitted it’s sent to the to the merchant’s account operator (whoever you have your merchant account with) then submits it to the card issuer (company who issued the card) and then on to the card network for final processing.  Check out this chart to get a better understanding of the process flow.


When the merchant account holder forwards the transaction for processing, the financial institution adds identifying information to facilitate the transfer of funds. If the credit card purchase is approved, the bank that issued the card electronically transfers funds in the amount of the purchase from the card holder's account to the merchant account processor. The financial institution that holds the merchant account waits for the arrival of these funds, deducts their fee and electronically deposits the balance into the merchant's bank account. Because each of these steps takes about one business day, the merchant receives actual funds approximately three business days after the credit card transaction is processed.


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