Types of Merchant Accounts & Providers

The term merchant account provider generally refers to any service that will verify a credit card, process the credit card transaction, and deposit the results into your account. A merchant account provider can be a bank, an independent sales organization, or credit card processors that refer customers to merchant account providers upon request.

The following is a list of companies that you will deal with when opening a merchant account:

1. Acquiring Bank
   
   All merchant accounts must be sponsored by an acquiring bank that will process the transactions and credits payments to the merchant account.
   
   
2. Credit Card Payment Processor
   
   When you establish a merchant account, you may have to choose between several third party payment processors. These companies are responsible for capturing, authorizing, and settling transactions through the Visa & MasterCard network. This processor is connected with the merchant’s site on behalf of the acquiring bank through a payment gateway.
   
   Some payment processors will require you to purchase or lease their equipment and process orders by hand. Others, such as Authorize.net, will offer instant verification and processing via the Web. These services can be more expensive, but they can make the process of accepting credit cards much easier.
   
   
3. Gateway Provider
   
   Internet and Moto merchants that use a secure gateway service will need a gateway provider to collect the credit card information and process the data securely over the web.
   
   
4. Merchant Service Providers
   
   The term merchant service provider refers to independent sales organization, banks, and other financial institutions that offer credit card processing services. Most of these companies are merchant account providers, but others require you to establish them on independently.
   
   Merchant Service Providers are responsible for setting up the merchant account through the acquiring bank and credit card payment processor. They offer the ability to accept credit card payments in exchange for a percentage of the sale, transaction fee, and other monthly fees. Merchant service providers should provide customer service support and send out monthly statements.
   
   Independent sales organizations (ISOs) are generally more tolerant of high-risk merchant accounts because they are not as tightly regulated. Much of their business comes from merchants that could not open accounts directly with a bank.

Third Party Merchant Account Providers

If you have a small business and cannot afford a merchant account, you do have the option of using a third party merchant account provider. These companies do not issue you a merchant account, but they do allow you to accept credit cards on their behalf. They handle the transaction process, provide secured service to a point-of-sale terminal or e-commerce site, and provide a monthly reporting service.

Larger businesses should avoid using this type of company. They charge higher rates, have a greater chargeback risk, and offer you no control. However, this is a great option for smaller companies that cannot afford the monthly fees associated with opening a merchant account.





Merchant Accounts
with no application fee