What is a Merchant Account Provider?

Malcolm Tatum

A merchant account provider is a service that makes it possible for businesses to accept credit and debit cards as payment for different types of goods and services. Providers of this type of service generally offer several options for the debit and credit card processing, ranging from face-to-face transactions to online commerce solutions. Costs for supporting this type of service vary, depending on the type and brand of cards the merchant wishes to process and the volume of business conducted by the holder of the account.

Credit card being swiped through a terminal.
Credit card being swiped through a terminal.

While banks once were the chief provider of merchant services, that is no longer the case. Instead, providers known as independent sales organizations, or ISOs, act as an intermediary between the merchant and the entities that issue the types of credit cards accepted by the merchant. This shift has actually been a positive one for many businesses, since the increased competition between different ISOs has made it possible for even small companies to obtain aggressive rates from more than one merchant account provider.

A merchant account allows a business to accept credit and debit cards.
A merchant account allows a business to accept credit and debit cards.

The typical merchant account provider offers several different service plans. Each plan includes specific forms of processing electronic payments efficiently. This approach makes it possible for the provider to offer an attractive suite of services to different types of merchants. For example, a merchant that wants to accept all major credit cards for face to face transactions can do so without having to pay extra for other forms of electronic processing. At the same time, a retailer who offers goods and services via the Internet only does not have to settle for a plan that also includes face to face electronic transactions.

Another common approach of the merchant account vendor today is to offer discounts and support that are likely to set the provider apart from its competitors. This often includes charging a lower rate per transaction for specific credit and debit card types. Some providers will also waive monthly service and account management fees, if the business generates a significant number of transactions per month.

At the same time, the provider may also offer customers the necessary point of sale equipment to scan credit cards and process a transaction in a real-time fashion. There are even some merchant credit card services that offer merchants small cash-back bonuses if they reach a minimum number of transactions within a given billing period. Plans of this type further offset the charges associated with accepting different types of electronic payments.

Working with a merchant account provider is definitely beneficial for different types of businesses. The ability to accept electronic payments for purchases means the business has access to the funds quickly, often within twenty-four hours or less. There are also no worries about having a check returned due to insufficient funds. Businesses that accept electronic payments also have to make fewer trips to the bank to deposit funds into business accounts, since the funds from the credit card purchases are electronically deposited on a daily basis.

Accepting credit and debit cards also tends to increase the number of customers who patronize a given business. With more people preferring to make even small purchases with debit and credit cards instead of cash, businesses who accept debit and credit cards are more likely to benefit from impulse buying by customers than businesses that accept only cash or checks. When coupled with the convenience and the increased potential to generate revenue, finding a reliable and affordable merchant account provider just makes sense.

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