Merchant Account

The Merchant Account


A merchant account is really a type of bank account that allows businesses to accept payments by payment cards, commonly debit or credit cards. A merchant account is established under an agreement between an acceptor and a merchant obtaining bank for the settlement of payment card transactions. In some cases a payment processor, independent sales organization (ISO), or merchant service provider (MSP) can be a party to the merchant account services. Regardless of whether a merchant enters into a merchant agreement directly with an acquiring  bank or via an aggregator, for instance PayPal, the agreement contractually binds the merchant to obey the operating regulations established by the card associations.

Methods Of Processing Credit Cards

Today a majority of credit card transactions are sent electronically to merchant processing banks for authorization, capture and deposit. Various methods exist for presenting a credit card sale to “the system.” In all circumstances either the entire magnetic strip is read by a swipe via a credit card terminal/reader, a personal computer chip is read, or the credit card information is manually entered into a credit card terminal, a computer or website. The initial methods, submitting credit card slips to a merchant processing bank by mail, or by accessing an Automated Response Unit (ARU) by telephone, are still in use these days but have long been overshadowed by electronic devices. These early methods employed two-part forms including a manual device for mechanically imprinting the embossed card number data onto the forms.

Credit Card Terminal

A credit card terminal is often a stand-alone piece of electronic equipment that allows a merchant to swipe or key-enter a credit card’s details as well as far more information required to program a credit card transaction. A credit card terminal is a dedicated piece of equipment that only processes credit cards although it is well-known for related transactions for instance,  gift cards and check verification to also be performed. A credit card terminal generally must beplugged in to a power supply and connected to a telephone line. However, some terminals can be powered by batteries and communicate over the world wide web or through a cellular phone data network. Once a credit card is processed (either swiped from the magnetic stripe reader or keyed-in on the keypad), it contacts the network to verify if the credit card can be authorized. The transaction is then stored over a machine until the polling window is opened. The machine will either upload the electronic funds directly to the merchant bank, or a polling service provider will dial in to collect, process then submit the details to the merchant bank.  The most popular credit card terminals consist of a modem, keypad, printer, magnetic stripe reader, power supply and memory card. These have retained the same straightforward design since the 1980s. As with computers, there’s a wide range of memory capacities as well as other features like built-in printers and debit card pinpads that affect the manufacturing price of the credit card terminal.

Automated Response Unit (ARU)

An ARU (also referred to as a voice authorization, capture and deposit) allows the manual keyed entry and subsequent authorization of the credit card over a  cellular or land-line telephone. With this procedure a merchant typically imprints their customer’s card with an imprinter to produce a client receipt and merchant copy, then process  the transaction instantaneously over the phone.

Payment Gateway

A payment gateway is an e-commerce service that authorizes payments for e-businesses and online retailers. It’s the equivalent of a physical POS (point-of-sale) terminal located in most retail outlets. A merchant account provider is normally  a separate company from the producer of the payment gateway. Some merchant account providers have their unique payment gateways but the majority of corporations use 3rd party payment gateways. The gateway commonly has couple of components: a) the virtual terminal that may  allow your merchant to securely login and key in credit card numbers or b) have the website’s shopping-cart connect to the  gateway via an API to allow for real-time processing within the merchant’s website.

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