MERCHANT ACCOUNTS

A merchant wishing to take in payment card transactions from a specific card association brand avails a credit line from an acquiring bank. This contract is known as a merchant account. In today’s times, such accounts are essential for businessmen as without it, they would be unable to receive payments that are processed via major credit cards.

Merchant accounts need to be marketed in the right way in order for merchants to avail the services. This is done either by the sponsoring bank directly contacting the trader, or through a middleman who is authorised and sponsored for such transaction by the bank. The details provided in the marketing brochures are provided by the issuer of the card like Visa, MasterCard etc. they are also bound by specific guidelines and fines for violations.

Certain merchant account distributors conduct there transactions with the businessman via a tool known as the Payment gateway. This is a service in the e-commerce technology era, which functions as a physical point-of-scale, only on an online scale. Though the payment gate and the merchant account provider are two separate bodies, some of the providers do have their own gateway to ensure complete control over the entire transaction. A payment gateway consists of a virtual terminal online which gives access via a login and key id, plus a websites shopping cart to enable real time actions for the merchant.

Another very popular method in which the merchant account providers process their client’s credit cards is via the credit card terminal. This is a sophisticated piece of technology through which the merchant swipes the card or enters the key codes to verify the account. When the entry is successfully processed, the machine connects with its specific network to authorise that the card can be used validly. This process is very quick and thus very popular among businessmen today.

Merchant accounts come with an array of fees and charges which need to be made either on a regular basis or on a percent basis or as a one-time option. These charges are agreed upon by the merchant and the provider, with the card issuer acting as a middleman. The 5 main charges that are involved in any merchant account processing are: -

• Discount Rates: including dues, network fees, assessment charges, payments to accept the card, interchange fees etc. the interchange fee is by far the largest of these discount rates. This is the payment to the card issuer made by the provider of the account.
• 3-tier pricing: this consists of a classification of the pricing strategy into 3 different categories – the qualified rate (which the merchant has to pay every time a regular credit card is accepted and approved); the mid-qualified rate (a percentage of the that the merchant is charged when the card doesn’t make the cut for the qualified rate); and non-qualified rate (the highest rate that the merchant has to pay up, when both the qualified and mid-qualified rates are not met)
• 6-tier pricing: this has been added on by the credit card issuers to facilitate the PIN based credit card system. In addition to the qualified, mid-qualified and non-qualified rates, there are with PIN and without PIN classifications in the 6-tier system.
• Interchange plus pricing: such accounts are dependant upon the interchange table scales that are given out by card issuers, creating a discounted rate with the addition of the interchange rate, other fees and mark-ups, etc
• Bill backs: this is one of the latest price sets, which involves paying of the interchange rate on the statements and paying the other dues, fees and assessments on the statement from the next month.

Recently, the merchant account stratum has been receiving an unfavourable reputation due to the companies not being registered and the heavy pressure applied with marketing tactics. A Better Business Bureau or BBB has been created to take this into consideration and improve the industry for future transactions.

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