Confused About Credit Card Processing and Merchant Accounts?

Language is an interesting thing. It enables us to communicate abstract concepts, but it can also be utterly confusing. For example, when an industry expert starts dropping jargon, you may end up feeling lost, even though you know exactly what they’re talking about. This is often the case in the credit card space. You know about your terminal into which your customers swipe their credit cards, but what’s all the rest?

Your credit card terminal is enabled by a credit card processing company, sometimes called a payment processor, or a merchant processor. These are third-party companies that link banks, customer accounts, and business accounts. Think of it this way: when you want to put gas in your car, you visit the gas station, not the oil refinery.

Similarly, cardholders don’t make credit card purchases by sending the money to the bank, or even to the credit card company. Instead, a payment processor works as a go-between, protecting your money and your data from cyber-thieves. It’s fast, safe, and convenient. Your role as a business owner is to open a merchant account with one of these credit card processing companies.

Understanding your merchant account

Depending on the company you sign up with, you might get a free account that’s instantly approved … or a pricy application fee and a prolonged approval process. Some merchant accounts also include free perks, and these bonuses can cover tools and services that are essential to your business.

For example, you need POS terminals. These are the actual terminals that clients use to pay. POS stands for “point-of-sale”. These terminals can include terminals that plug into a wall outlet, portable electronic keypads, smartphone apps, eCommerce websites, and online virtual terminals. The right merchant processor will provide your selection at no additional cost. Pick the option that best suits your business.

In addition to POS terminals themselves, your merchant account provider should help coding your payment options. Each terminal has to be programmed, enabling it to accept transactions from multiple credit card networks (Visa, Amex, MasterCard etc.). Some merchant accounts will offer these programming services for free, while others charge up to $95, sometimes in addition to an account set-up fee!

The process itself

When a customer buys something from you – either in person or online – they’ll probably use their credit card. If it’s a virtual transaction, they might type their credit card details onto your website. Your merchant processor will then instantly verify:

  • The cardholder’s personal information matches the information associated with that credit card.
  • Their credit card limit is enough to cover the transaction.
  • The customer’s bank and their credit card network both approve the transaction.

This verification is practically instantaneous. The cash is then transferred through the payment processor to your own bank. You’ll see proof of the transaction right away, and you can access the cash in 24 to 72 hours.

For more information on credit card processing and merchant accounts, or to sign up for a merchant account, please call (888) 924-2743 or go to

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