Different Types of Merchant Accounts

After cash, credit cards are the most widely accepted means of payment in the world. No matter what business you are running, or what product you are selling. Chances are that you will require a credit card processing system. From American Express to Visa, the brand may vary, and since there is no such thing as an individual payment gateway for each individual company. Every company may have a payment system that is unique to them, but the payment gateway is what is the essential link. But before we go into the technicalities, lets get some of the basics out of the way. Especially some of the terms just used.

Any credit card transaction on the planet acts in a predefined manner, first the customer will offer his credit card details, the credit card details are then processed through a payment gateway, and finally the credit card payment is received in a merchant account. The way in which the credit card payment is accepted is different, you could be using the credit on a EPOS (electronic point of sale terminal), or you could have a successful online store that is accepting payments. The important thing to remember is that the mode in which you are accepting the payment is not as important as having a payment gateway and a good merchant account.

Okay so the next thing to discuss here is what is a payment gateway? well a payment gateway is usually a third party system that processes the credit card transaction it could be the server an EPOS dials out to, an e-commerce system, however the term payment gateway usually refers to the latter, and once the checks are done the funds are then transferred into a merchant account. The essential component is the merchant account, the merchant account is offered by companies and based on the volume of transaction and certain other criteria; the charges and upkeep is different. No merchant account is free as the company is offering you services. Merchant accounts in general are of various categories and depending on the type of business you are running, different monthly charges, and percentage charges are applicable.

Important merchant account types

a) Regular merchant accounts – Although in business there is no such thing as a typical business, however a majority of businesses are usually treated as regular merchant accounts, they have low maintenance fees and lower rates than other merchant accounts.

b) High risk merchant accounts – This category is usually reserved for high risk credit card processing accounts, for example accounts that handle a large volume of transaction that may or may not offer a 100% authorisation rate. An example will be an outbound call centre, that attempts hundreds of credit card transactions to verify the credibility of the credit cards. There are also additional complications like currency conversion involved. Hence the term high risk merchant account.

c) Specialized merchant accounts – There are some businesses that require specialized credit card processing, or might require a specialized merchant account that caters to requirements such as offshore processing, etc. Such merchant accounts are usually referred to as specialized merchant accounts.

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