If you run a small or medium-sized business, then you will need a merchant account in order to accept payments by credit or debit card.

Why are merchant accounts important?

A merchant account is not like a business bank account, they are two separate things. Without a merchant account, your business will not be able to process card payments.

A merchant account holds details of the transaction and the money from customers in an account. This information is then routed to the relevant card association, such as Visa or Mastercard. The card association then forwards the transaction details to the issuing bank. If there are enough funds in the account associated with the card, then the transaction will be approved.

In order to hold a merchant account, you need a way to be able to take card payments. This could be by card machines that can be wireless or countertop fixed terminals, over the phone using a virtual terminal, or online using an internet merchant account.

Merchant accounts tend to have associated fees. The higher the value of the annual transactions, the lower the fees will be. Fees may be charged monthly, or per transaction. For debit cards, the typical fee is 0.3% – 1% per transaction, credit cards are 0.8% – 2% per transaction, the authorisation fee is typically around 2p – 4p per transaction. On top of this, there will be card terminal rental fees, virtual terminal, payment gateway and joining fees, and a service charge. Different merchant account providers will charge different fees, so it’s worth shopping around to look for the best solution for your business.

There are three types of merchant account:

  • Aggregate merchant accounts: These are offered by payment facilitators and are the best choice for small and midsized businesses (SMBs).
  • Dedicated merchant accounts: Dedicated merchant accounts are set up directly with acquiring banks. They offer you greater control as to when your money is paid to you.
  • High-risk merchant accounts: These are suitable for businesses that may struggle to get approval for an account from other providers as their business may be classed as high-risk. Rates will be higher for these accounts.

Ready to Start Accepting Payments with Your Own Merchant Account? Contact Rapyd to Get Started.

Mark Stiltner

Mark Stiltner is a finance and fintech writer. From educating independent investment advisors on retirement plan management to helping families maximize their savings to educating businesses on global payment preferences, Mark has spent over a decade researching and educating audiences on complex financial topics. Mark has been a contributing author on blog articles and educational content for the Bank of Colorado, Pinnacle Bank, TD Ameritrade, First Data and Rapyd.

This website uses cookies.

Read More