Learning the Ins and Outs of a Credit Card Merchant Account

Credit transactions are far more secure for merchants. The business is paid immediately after authorization. This payment is guaranteed no matter what the circumstances. If a customer charges to their card and then defaults, a business still receives their money. A legitimate dispute is the only time a payment may not be deposited or credited back to the customer. Cards are considered safer than cash these days. These items discourage the occurrence of employee theft and help owners keep less cash at each business location. Before the credit card era of business, each company had to evaluate a customer’s finances and overall history before offering credit. The business owner themselves took the financial risk. Credit cards allowed the risk to be transferred to financial institutions. When a consumer does not have enough cash to pay for their purchase, they turn to their credit card. Goods can be bought immediately. Customers are not limited to the amount of money currently on them or their financial account balance. This additional convenience helps merchants secure sales.

Small Business Credit Card Processing: The Role of a Merchant Bank Account

A credit card merchant account is required for small business credit card processing. Credit cards are run through a card reader and authorized over a banking network. Once the authorization is complete, a deposit is made into the account. That is processing in its simplest form. A business must offer goods or services for merchant processing to be possible. Transaction fees consist of a certain percentage amount of the sale. A fixed fee is also charged for each purchase. If too many disputes or cancellations occur, the business is penalized. Providers require sales to be enough to at least cover these costs. Businesses that cannot meet this requirement may be required to pay monthly minimums  until their volume meets the minimum costs.

A transaction must be authorized by the card holder bank and verified. The customer pays for their purchase using their credit card. This payment is submitted by the merchant to the bank. The card number is then verified along with other transaction information. Verification occurs between the merchant’s bank and the card holder’s bank. The amount to be withdrawn is set aside from their total card limit. An approval code is generated with the store transaction. These authorized transactions are added to a batch file which is sent to the merchant bank. Batches get submitted after business has completed for the day. If for some reason a transaction does not get added to the batch, the authorization remains active and valid for a specified period of time. The credit card association processes the batch file after it is received from the merchant. Customer accounts are debited and funds are sent to the merchant bank. Fees are removed and then the funding is deposited into the business account. Money might be held until a chargeback is resolved. The process is quite detailed and requires a merchant bank account to be completed. Businesses run the card and financial institutions handle the rest of the processes in the background. Credit transaction processing helps businesses secure transactions, increase earnings, and provide better service to customers.