What is a merchant account? A merchant account is basically a bank account provided by a merchant service provider which allows you to accept and process credit card payments. This article will review the what, how, when and why of merchant accounts.

A merchant account is a relationship and a trust you have with a bank that has agreed to allow you to charge people's credit card, while they honor it and deposit the funds into your account. The bank is responsible for debiting the funds from the customer and depositing it into your account. There is usually a processor that is involved that processes the credit cards for the bank and lets them know when the funds are available. When you are given a merchant account from a bank, they are relying on you to uphold your promises to your customers by delivering the products and/or services to them in a timely manner.

Why do I need a Merchant Account?

Without a merchant account, you can still accept payment, but not by credit card. In order to get money from a credit card into your bank account, there has to be a merchant account involved. There are a few services that allow you to accept credit cards without a traditional merchant account, but the concept is the same, you still need a bank to underwrite you to manage the risk.

What are the requirements for getting a Merchant Account?

Generally, most Merchant Account providers require you to be an official US-based business, with a valid business checking account and good credit. Because of the risk involved, many Merchant Accounts also require an extensive amount of paperwork, as well as a credit check on you. It is possible for just about everyone to get a merchant account, although as the risk increases, so do the fees and rates charged by the merchant account. It is possible for non-companies to get a personal merchant account, and there are international companies that issue merchant accounts for non-US citizens. If you are an organization that exists in several different nations, you may need to open different merchant accounts for each country.

Where can I get a Merchant Account?

Merchant accounts can be obtained in a lot of different ways. Most banks offer merchant accounts, and many banks offer their merchant accounts through resellers or through a payment processor partner. A good place to start is our top ten list of best merchant accounts.

I have a home-based business, are there any alternatives?

If you aren't an official business, but still want to be able to accept credit cards, then you'll want to explore the idea of a "personal" merchant account. These types of services are offered by Propay and Paypal, and allow you to be underwritten as an individual, instead of as a company.

Once I have a Merchant Account, then what?

Once you have a merchant account, you are ready to start accepting credit cards. The next section talks about the different ways you may want to collect that information. Be sure to protect your credit as well with companies like LifeLock if you are going to be doing business with credit cards.

Related Article: How to Accept Credit Cards >>