Merchant Services

What is a Merchant Account?

A business with a Merchant Account is able to accept credit cards as payment for products and services. The account acts as a contract between the business owner and the bank so there are set rules pertaining to how products are purchased, sold, and paid for and any violation of these rules is fraudulence on the business' part.

When filing for a Merchant Account, an Online Merchant Account Application (OLMA) is completed and submitted to an Independant Service Organizations (ISO) that also serves as an underwriter. The ISO evaluates the potential success and risk of the application and will either approve or deny the account. Learn more about how Risk Management works in determining merchant Credit Risk and Fraud Risk. If the Merchant is found to be in violation of the agreement, the ISO can shut down the Merchant Account.

In addition, there are two different types of Merchant Accounts.

"Over-the-Counter" (OTC) : Used for retail merchants and typically have lower transaction fees due to customer credit credit cards being physically present for the sale.

"Money-Order/Telephone-Order" (MOTO) : Used for Ecommerce businesses and where money order, telephone order, or online orders are made without the credit card being physically present. The transaction requires two steps by verifying the data where money is debited and then placed in a 30-day holding period without actually charging the card. Only after product is shipped, that the card is charged.

What is Credit Card Processing?

While having a Merchant Account signifies that your business can accept credit cards as payment, you still need a means to process credit cards.This is where credit card processors step in, linking you with merchant banks and credit card companies. They make their money by charging various fees, that can range from application fees, monthly fees and transaction fees. (i.e. each time a sale is made with a credit card)

That's why you'll see some business establishments require a minimum dollar amount purchase before a credit card will be accepted as the transaction fee may be more than the sale is worth.

Since competition between processesors are strong, the application process is usually painless and quick, since the sooner you're approved, the faster both parties can start earning revenue.

What is a Virtual Terminal?

After receiving a Merchant Account and the means to credit card process, you now need the actual system that accepts credit card information. A Virtual Terminal is the online version of the hardware terminal that you use to swipe your credit card with at retail locations.With a Virtual Terminal you can convert an Internet connection into an effective payment gateway allowing credit card not present transactions.

Only when you have all three components of these Merchant Services, will your business be ready to take on the world of Ecommerce.