merchant account

Merchant account is basically a kind of bank-account which permits business to admit payments by credit or debit cards. Merchant account serves as conformity between a merchant, a merchant-bank, and the payment processor to settle the debit card and/or credit card transactions.

Let us now consider the various methods used in processing the credit cards:

Nowadays, majority of transactions made by credit card are sent to the merchant banks electronically for authorization, confinement, and deposit. Several methods are available for presenting credit-card transaction to “the system”. During such circumstances, either the overall magnetic-strip is comprehended by swiping through the credit card reader/terminal, or a computer-chip is comprehended, or credit-card detail is entered manually into the credit-card terminal that is a website or computer. Earlier methods like submitting credit-card slips to the merchant bank via United States mail or through ‘Automated response Unit’ via telephone, are still used but they have now been outshined by the electronic devices. Earlier methods like these used manual equipment and 2-part forms for imprinting mechanically the card number onto forms. Practically, it is excellent method to swipe credit-card since rates too will be very low and fraudulent cases is also reduced greatly.

Firstly, let us now see what credit-card terminal is?

Credit-card terminal is simply a stand-alone electronic device which permits merchant to key-enter or swipe credit card and additional details which are essential in processing a credit-card deal. The deal is stored on machine till polling window gets opened. This machine will upload electronic payments directly to merchant-bank, or the polling provider will just dial to gather process and submit data to merchant bank. Popular credit-card-terminals comprises of a memory card, power supply, magnetic-stripe reader, printer, keypad, and modem.

Secondly, let us consider the functioning of an ARU (Automated Response Unit):

ARU allows manual keyed-entry along with authorization of credit-card over landline or cellular telephone. Using this method, merchant imprints the card information of their customer’s using an imprinter in order to create the merchant copy and customer receipt. Further on processing the transaction over phone instantaneously.

Thirdly, credit card processing is done by payment gateway an e-commerce facility which authorizes funds for online retailers and e-businesses. This facility is equivalent of the point-of-sale (POS) terminal situated in almost all retail outlets. Most of the merchant-account providers possess payment gateways of their own but majority of the companies utilize third-party payment-gateways. Usually gateways have two components. They are:

1.) Virtual terminal: which allows merchant to login securely and key-in his/her credit-card numbers.

2.) Website’s shopping cart: which connects to gateway through an API, so as to permit real-time-processing from merchant’s website.  

Fourthly, “Level-2 or Level-3 Processing”, that is, purchasing cards: MasterCard and Visa have created specialized kind of credit-card primarily used by the businesses and government agencies. Many government agencies and corporations rely on this payment type to pay off their suppliers and service providers.

Merchant account includes varieties of fees, few periodic, and others are charged on percentage or per-item basis.