Merchant Account versus Bank Accounts
In your day to day activities of depositing money into your bank account you
physically go to the local branch or visit a remote ATM (automatic teller machine)
and perform the transaction.
A merchant account is different, because you can't be physically present during
the 'virtual' transaction. The merchant account is merely a specialized
bank account where money from credit card sales is first routed to and held
before transfer to your own checking/savings account. When a payment has
been accepted from a client online you will need a 'third party' to approve
the transaction, hold the money for you, and finally deposit it into your account.
That is the purpose of a merchant account.
This process is usually fully automated in ecommerce transactions through
a payment gateway. A payment gateway is the software programming term used
by merchant account providers that represents the front door to their credit
card approval programs. Since your shopping cart is a software program it
needs a place to 'talk to' when requesting the approval of a credit card
transaction. The shopping cart uses the payment gateway for such purposes.
It contacts the payment gateway of the merchant account over the web, sends
the payment amount and credit card details and then waits for an approval
or denial message. Depending upon what message is received
will dictate if the transaction can be completed and what the shopping cart
should do next. If it was successful (the credit card was valid, the expiration
date valid, and there was room on the card for this amount) then the money
will transferred into your business account in real-time,
or during various points in a 24 hour period.
Merchant accounts have different policies, different pricing's and different
types of payment gateways that are written in many programming languages.
When selecting a merchant account it is very important to understand the
following:
1. How many transactions a month do you expect to process (i.e. 300)
2. What is the average size of a typical transaction (i.e. $35.99)
3. What programming language is the shopping cart written in (i.e. Java,
ASP, .NET, PHP, PERL etc..)
4. What is the operating system of the web server (i.e. Windows, Linux,
etc..)
This portion of the ecommerce setup is the most complicated because it typically
requires knowledge and expertise in web technologies beyond the scope of
most new merchants. It is suggested that you consult a qualified ecommerce
web development company or consultant who can further assist you.
Next, let's see what it takes to make sure that your credit card transactions
are safe and secure across the web.
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