So, you have an idea for a business, you’ve got a business plan and you are on your way to begin selling your product or service. Great!
But wait, how are you planning to accept payments? If your answer is cash only, I’ll let you in on a little secret: In North America, around 80% of the value of consumer spending is cashless1. So, now that we are on the same page, how can you accept payments beyond just cash?
You will need a Merchant Account to accept card payments.
What is a Merchant Account?
A Merchant Account is a type of bank account that allows businesses to accept card payments, whether they’re Debit or Credit. The merchant account is established under an agreement between the merchant (business owner) and acquirer (financial institution). Within that agreement, there is a payment processor or independent sales provider (ISO) that will exist as a middleman between the merchant and the acquirer to facilitate the transaction. The agreement exists to ensure that merchants abide by the operating regulations established by the card associations, like MasterCard or Visa.
In the agreement, the acquirer exchanges funds with other banks (ones who issue payment cards) on behalf of the merchant. Funds are then transferred, minus interchange fees, acquirer fees, and reversals to the merchant at the end of a given period.
Every payment made with a credit card involves the transfer of funds to a merchant account. The merchant has full responsibility for the transactions that occur with their account, and each bank has its own terms of service to which account‐holders must adhere to.
Merchant Account Fees
Interchange fees are fixed processing rates set by the card association.
Acquirer fees are an additional markup added to association interchange fees to facilitate transactions.
Why Go With A Merchant Account?
In terms of cost and customer experience, a Merchant Account is the most effective way of accepting payment by card. Once you have a Merchant Account and a payment processor, you will be able to accept card payments in-store, online and on mobile devices.
To learn more about a merchant account for your business, talk to one of our Payment Advisors.