A merchant account is a type of bank account that allows a business to accept payment by credit or debit cards. The business sets up the account either directly with the merchant acquiring bank or through a third party.

How the payments are accepted will depend on the type of business. For example if it is an ecommerce business, payments will be accepted online, if the business is in retail a chip and PIN machine will be used to process payments.

When a payment is made to a retailer using a chip and PIN card, the payment may be approved offline or verified with the merchant acquiring bank.

For online payments a payment gateway is used. This is the online equivalent of a card machine and typically the provider is a third party. Payment gateways will either allow the merchant to input card details or allow details to be input to their website and processed in real time.

Merchant Account Fees

The fees for merchant accounts vary between providers and will also depend on factors such as the number of transactions and the value of transactions each month.

Expect to pay a setup fee, a rental fee for each chip and PIN machine and a fee per transaction (transaction fees will be set at a minimum per month).

Seasonal Merchant Accounts

Seasonal merchant accounts are for businesses that are active for certain parts of the year but not for others. Such businesses as Christmas shops, fireworks retailers, tourist shops fall under this category.

When setting up a seasonal merchant account you specify which months you need the account to be active. With a seasonal merchant account fees are only payable when the account is active, however be sure to see if annual fees are payable.

High Risk Merchant Accounts

High risk merchant accounts are only applicable to certain types of business where there is a perceived increased risk of fraud. Certain online businesses such as gambling websites are affected.