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Merchant Account Basics

Merchant Account Basics

If you have a business and you want to accept credit cards, you need a merchant account. A merchant account is an arrangement between you and a credit card processor that allows you to accept credit card payments from your customers. Those payments are then deposited into your bank account by the credit card processor.

There are two types of merchant accounts. A merchant account for card-present transactions is used when the credit card and cardholder are physically present at the time of the sale. A merchant account for card-not-present transactions is used when neither the card nor the cardholder are present for the sale, as is typical in e-commerce and mail order/telephone order sales. If both card-present and card-not-present scenarios apply to your business, you may need more than one merchant account.

In order to get a merchant account, you’ll need to fill out an application and have it approved by a credit card processor. The processor then equips you with the products and services you need to accept credit cards.

Credit card processor acts as a middleman between you and the issuing bank (the bank that provides card holders with credit) during a transaction. When the issuing bank authorizes a customer’s transaction, the payment is credited to your merchant account by the processor. At the end of each day, you settle all of your transactions in one batch with the processor, which deposits the funds into your bank account, typically within two days.

When setting up a merchant account, it’s best to use a credit card processor — like TSYS® — that allows you to use the bank of your choice for your deposits. This account should be separate from any of your other bank accounts.


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