Opening a Merchant Account
A merchant account plays an important role in online transactions and serves as an intermediary between the customer’s account and the merchant’s bank account. What is a merchant account, what are the types of merchant accounts and what are the advantages of using one over the other? In this article we will try to answer these questions to help you set up your own merchant account and process online payments flawlessly.
What is a merchant account?
A merchant account is an online account, which collects the payment provided by the customer through a credit card company and other services. For many online transactions, such as credit card payments or PayPal transactions, you, the merchant, have to set up an online account separate from your regular bank account to receive payments from customers.
This account is created in order to process the transaction in a safe and secure manner. After receiving the payment from your customer, the money will be kept in the merchant account from 2 to 7 days, before transferring to your regular bank account.
What are the different types of merchant accounts?
There are two main kinds of merchant account: firstly, the “dedicated” one and secondly, the “aggregated” one. The dedicated merchant account is an account created for one specific merchant in a similar manner as your bank account is created just for you. Some payment gateways require a dedicated merchant account and automatically set one up for you.
The biggest advantage of a dedicated merchant account is the quick processing of payments: 2 days after completing the order, the money should be transferred to your regular bank account. Dedicated merchant accounts also allow you also to negotiate custom rates, which often depend on the type of products you are selling and the volume of sales.
Unfortunately, the rates are also the main reason why keeping a dedicated merchant account can be quite troublesome. The system of qualified and non-qualified rates is very complex and difficult to comprehend, especially for less experienced merchants. As a result, many beginners end up paying more for their sales than they thought they would and find it more difficult to keep the financial side of things under control.
The aggregate merchant account serves as one platform for many different companies. One of the most popular aggregate merchant accounts is PayPal. This kind of service does not require as much information about your volume of sales and types of sold products as dedicated merchant accounts, and are much easier to comprehend and maintain by less experienced merchants.
The downside of aggregate merchant accounts is the fact that you cannot negotiate the rates and often it takes as much as 7 days to transfer the money to your regular bank account.
When you are ordering custom Magento development services for your online store, make sure that you choose the best type of merchant account for your business: dedicated merchant accounts are recommended most of all to seasoned merchants who have a good understanding of the financial aspects of online businesses; aggregated merchant accounts are recommended more for small companies and new-to-e-commerce merchants.
Marta Gromadzka is a writer and editor with a wide variety of experience, including writing for websites internationally and editing books on many different subjects and in a variety of formats.
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