If you own a small business, it is recommended that you start accepting electronic forms of payment. Of course, you must have heard of merchant accounts. They refer to bank accounts belonging to businesses that allow you to accept debit or credit card payments. Given the so many options available in the market today, it can be challenging to find the right merchant account provider. This article discusses all you need to know about credit card processing, merchant accounts and how you can pick the best match for your business venture.
Credit Card Processing
Recent statistics show that there are over 1 billion credit cards in the US. According to the Federal Reserve Payments Study, by December 2019, the value of credit card payments had increased to $6.7 trillion. credit card processing plays a significant role in card payments because it enables faster transactions. It only takes two days for funds to be available in your account. So when you decide to start allowing card payments from your customers, no matter the kind of business you operate, you will need to have credit card transaction processors. Understanding how credit card processes work will help you remain updated of the most recent technologies. It will also help you choose the kind of merchant account you desire.
Merchant Account Services
This refers to banking services that let you process transactions and payments electronically. Such methods include debit cards, mobile payments and credit cards. In addition, merchant services cover the hardware needed to facilitate electronic transactions as well as the software applied. The merchant service provider, commonly known as MSP, is the company providing those services. To better understand the need for a merchant account, we will explain the process of credit card transaction. The process involves three major stages: authorization, funding and settlement. During the authorization phase, the following steps take place:
- Initiating of payment by the customer, mainly done through swiping card if the customer is physically present or shopping cart when doing so online.
- Your shopping cart then requests authorization for payment from the processor. After that, the processor then sends the necessary transaction information to the credit card firm. After verifying the authenticity of the card, the card company shares the same information with your bank.
- After approving, the bank will then decline or approve the transaction based on you customer account information, which later returned to you.
In the funding and settlement stage, the following occurs.
- You send approved transactions to your parent bank at the end of the day. In the US, the funds are normally collected from consumer’s bank.
- After that, the issuing bank then charges the account for the purchase and services
- Funds are then channeled to your bank account after two working days. The MSP services lets you accept electrical forms of payments.
Getting a Merchant Account
Getting a merchant account is not an easy task. You need the right approach to get the best provider. Discussed below are some ways you can get a good merchant account.
- Determine your card processing needs: The perfect service provider will rely on what your business needs. Make a decision on how you will be accepting credit cards online. Find answers to questions like will you be accepting online credit cards, Visa or mobile payments?
- Study the MSP market: Carefully analyse the marchant services provider to get the perfect match for your small business. The best aspect about this step is that you will know the features to prioritize.
- Set up your website: Most companies and institutions will need you to have a website to meet the minimum requirements. Coming up with a business website is therefore, very important.