merchantaccounts

Merchant accounts are specialized banking arrangements that allow a business to accept card payments from customers. They function as a conduit between the merchant, card networks, and the acquiring bank, with funds from approved transactions eventually deposited into the merchant’s bank account after settlement. The merchant account is typically provided by an acquiring bank or a payment processor, which underwrites the merchant and handles the flow of authorization, capture, and settlement.

How it works: when a customer swipes, taps, or enters card details, an authorization request is sent through the payment processor to the card networks and the issuer. If the issuer approves, the transaction is authorized and the funds are earmarked for settlement. At the close of a settlement period, the processor transfers the funds to the merchant’s account, minus processing fees and any reserves or chargebacks held back by the acquirer.

Types and arrangements: traditional merchant accounts are often set up directly with an acquiring bank or through an independent sales organization. Some merchants use payment facilitators or aggregators, which provide a single master account and sub-accounts for multiple merchants, simplifying onboarding but sometimes with different risk controls and fee structures. Pricing commonly includes a discount rate, per-transaction fees, and may add monthly or gateway fees; structures vary and can be interchange-plus, tiered, or flat-rate.

Compliance and risk: merchants must comply with data security standards (PCI DSS) and often implement tokenization and EMV-compatible systems. They face risks such as chargebacks and fraud, which can require reserves or rolling holds.

In summary, merchant accounts enable card payment acceptance and fund settlement, linking the merchant to the broader card payment ecosystem through acquiring banks, processors, and gateways.