What is a merchant account?

By Lyn Lomasi

In simple terms, a merchant account allows a business to accept credit card payments and may offer other merchant services, too. A merchant account can be obtained through a credit card company, a bank or another payment processing provider. Your company can only accept credit cards and receive related merchant services through the use of a merchant account.

What is a merchant account?
A merchant account is a contract between a business and a bank, which extends a line of credit to your business through that merchant account. A merchant account can also be created directly with a credit card company, such as Visa, MasterCard or American Express.

An intermediary service provider is another company that can create a merchant account for you, enabling your company to accept credit cards. It actually holds the merchant account and offers merchant services to your business. PayPal is one example of an online payment processing company that does this. Without a merchant account, your business cannot accept credit cards.

In addition to a merchant account, the bank or third-party service provider you deal with may offer other merchant services, such as those that allow you to accept debit cards, electronic checks and gift cards. Merchant services also may include transaction tracking in real time. Depending on the nature of your business, a merchant account can be managed over the phone, online or through a credit card terminal. Some businesses may use a combination of all three.

Which merchant account services your company should use will depend on a variety of factors. Many companies that offer merchant services will analyze your business' situation to help you determine which type of merchant account or which merchant services you will need.

Article by Lyn Lomasi

Published: June 2, 2009