Merchant Account FAQ

Our merchant account FAQ list offers a comprehensive overview of the most frequently asked questions within the merchant account industry, together with detailed answers to the questions. It provides information on merchant account types, benefits, processes and set up to name only a few.

Select from the merchant account FAQ list to gage a detailed understanding of topics that are most relevant to you.

What is a merchant account?

A merchant account is an account that enables you to accept credit card and debit card payments from your customers either offline or online. A merchant account serves as an agreement between a retailer, a merchant bank and payment processor for the settlement of credit card and/or debit card transactions.

What is a payment gateway?

A payment gateway is a designed as a bridge between the merchant and the acquiring bank. It is a service that automates the payment transaction between a shopper and a merchant. Through secure internet connections, the payment transaction is done on behalf of the merchant and the customer is able to safely process the payments.

What is a virtual terminal?

A virtual terminal is essentially an online version of a POS terminal, such as a chip and pin machine. A virtual terminal is a facility that is built into your merchant account to enable customers to purchase goods and services online via credit and debit card payments.

Do I need a merchant account?

In today’s business environment, many people prefer to pay by credit card or debit card as it is a convenient and secure form of payment. By offering this service you will expand your client’s base and by offering online credit card processing you can reach customers across the globe. Credit card processing also enables clients that prefer not to use cash to pay for items. Having a merchant account can only help your business to grow.

How do I accept credit cards online?

To accept credit cards online, you will need to apply for a merchant account that is specifically designed for online credit card acceptance. By applying for and getting an online merchant account, you will be able to connect your online shop to the processors gateway to accept payments from your clients online.

Why are there different rates for different accounts?

Depending on the industry of your business online processing risks may vary and as such the rates incurred will either increase or decrease depending on the level of associated risk. For instance a standard online retailer that sells shoes online is considered to be a lower risk than someone who deals in adult websites. This is because the risk of chargeback is much higher for adult merchants than it is for general retailers.

Are fees involved with Online Merchant Processing?

Generally speaking, fees are incurred with online merchant processing however the amount of the fee charged will vary from processor to processor. In most cases you will be expected to pay the following fees: Discount Rate – Percentage of the value of the transactions, Transaction Fee – is generally under a dollar, paid per transaction that is processed, also known as a Gateway Transaction Fee, Refund Fee – This is the fee that is charged per refund that you issue. Chargeback fee – This is the fee that you will pay every time a client charges back on a transaction you have processed. These fees are generally high, and can range from $25 per chargeback to over $150 per chargeback, depending on the state of your processing account when a client charges back. There are also additional fees that you may be expected to pay when you have a merchant account, these include things like AVS (Address verification) and additional anti fraud fees.

Why are the Fees higher for Online Merchant Processing?

With any CNP (Card Not Present) transactions the risk of fraud are higher. As online processing falls into this category, by normal processing standards, online processing is automatically classed as high risk processing. With CNP processing, there is no physical signature on the credit card receipt issued, and therefore when a client disputes a charge (charges back) their bank is far more willing to issue their money back to them.

What is the difference between a 3rd party and a direct account?

A direct merchant account is an account that is held with your own bank, where the funds are deposited straight into your bank account with the bank. A third party account is an account that you hold with a 3rd party, where they are connected directly to the bank, and they are responsible for paying you. When you have a direct account, the funds are generally settled into your account within 1 week of processing the transaction, however with a 3rd party account; you generally receive payment for them 2 weeks in arrears. 3rd party accounts are also generally more expensive, and have additional fees, like wire fees.

What is a POS terminal device?

A POS terminal device, also known as a Point of Sale or Point of Purchase device, is a computerized machine used to conduct physical retail transactions. Common POS devices are Chip and Pin terminals, where a customer enters their card and PIN into the device to process a payment.

What is a Chargeback?

A Chargeback or disputed charge is when a client goes to their bank to request their money back for a transaction that a merchant has processed. Chargebacks were originally designed to protect clients from fraudulent transactions that were put onto their credit cards when it was stolen. However in recent times, it has effectively become the card holder’s ultimate defense against fraud, and allows them to dispute any charges on their credit card that they are not satisfied with.

What is Rolling Reserve?

Rolling reserve is a percentage of processing that is held by processors of online transactions. The percentage held by the processor, as well as the length that it is held for is determined by the risk class of the online merchant. Generally rolling reserves are equal to 10% of the total value of transactions processed and held for 180 days. The amount held is not as significant as the time frame, as 180 is the statute of limitations for clients to dispute a charge with their bank.

What is a monthly minimum fee?

A monthly minimum fee is what processors will charge merchants on a monthly basis. The monthly minimum fee ensures that any merchant that signs up with a processor is worth the processor’s time. Monthly minimum fees are generally quite low, and were introduced in order for online processors to accept smaller clients without having to charge them monthly maintenance fees. The monthly minimum fee is generally how much a processor must take from a merchant, in order to make a profit from them.

What is a discount rate?

A discount rate is a rate that is charged per transaction for every credit and debit card transaction that is processed. There are a number of price models used by banks and other merchant providers, and discount rates thus vary from one processor to another. For example, if you have a discount rate of 3.5%, and you process a transaction worth $100, you will end up paying $3.50 to the processor for processing the transaction.