What is a Merchant Account? Payments Processing Simplified in 5 Steps
Quite simply, a merchant account is a bank account that enables an individual or business to accept credit cards for payment of their goods or services. That merchant account might be provided by a merchant acquirer/acquiring bank, who might also serve as processor. With that merchant account in hand, here’s a simple breakdown of payment processing in five steps.
Step #1: Choose the best-fit processor
to meet your business needs and goals. Aim for a payments processor that has experience servicing clients in your industry so they can anticipate your needs and continually work to develop solutions to help grow your business.
Step #2: Choose the right services, software and hardware
to meet your needs by working with your processor. Consider what types of payments you need to accept, based on your current customers and desired, target future customers. At a minimum, you’ll need a terminal or software that accepts traditional magnetic stripe cards and EMV chip cards.
You should also think about whether accepting mobile payments is important for your business growth. Are many of your customers millennials or are you actively working to attract more young customers? If so, purchasing equipment and software that enables you to process mobile and NFC payments may be a wise investment for your business. Depending on your checkout processes, it may be important that you purchase a UPC reader for in-store terminals or that connects to a tablet for on-the-go payments ease.
Step #3: Attract customers to your business
who want to pay with a credit or debit card. Perhaps you already have a steady flow of shoppers who want to pay using cards—that’s great! But, if your business will be accepting electronic payments for the first time, you’ll need to spread the word that you’ve recently added the convenience of card payments. Inform customers by:
- Posting signs at your physical locations
- Sharing the news via your business’s social media pages
- Including the information in your regular customer email blasts
Step #4: Process transactions
by customer card-dipping at EMV terminals, swiping the card on your terminal, or entering the transaction data into your payments software. Your processor will transmit this data between your systems, the card networks and the issuing and acquiring banks.
Step #5: Get paid
via automated clearinghouse (ACH) for your credit card transactions. The acquiring bank credits your account for the total amount of sales you’ve made; your account will be debited for associated processing fees on a daily or monthly basis, depending on your contract. It’s important that you choose a processor who will help you get your money quickly so you can keep your business well funded and running smoothly. Don’t risk being caught without money in your account to handle an inventory fulfillment order or payroll.
It’s important to understand the ins and outs of credit card processing so you can choose the best processor to meet your needs and know what you’re getting for your money. Your processor should be able to answer any other detailed questions you have about the payments process.