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Your guide to merchant accounts

As is commonly known, every business owner needs to have a payment acceptance solution. But with this comes the question of a merchant account. A merchant account is different from a business account as this is where funds and payments received are generally settled.

As a budding entrepreneur, it’s important to be aware of the various types of accounts out there to help you make the best choice for your business.

A merchant account is an account that needs further clarification due to some of the confusion that may surround it.

In this blog post, we’ll take a look at the ins and outs of a merchant account, so keep reading for more!

Merchant accounts explained

Jumping straight into it, a merchant account is a special account held by a merchant at a financial institution or bank, which enables the merchant to accept card payments – both debit and credit. 

Since there is a detailed process involved from the moment a purchase with a card is made to the moment the funds finally arrive in your account (for more on this, see the section below), and also take into consideration the fact that there may be returned goods, a merchant account is necessary for any business that wishes to accept card payments.

Some go as far as saying that a merchant account acts as a holding-pen – “a secure place for funds to sit while the bank checks to make sure the customer has enough money in their account to make payment.” 

A merchant account means that the merchant will need to sign an agreement with a payment services provider, such as a bank or a financial institution, in order to be able to accept card payments.

This agreement is usually accompanied by the purchase or rental of a card payment terminal with which payments can be accepted and processed.

Obtaining a merchant account

Despite the competition in the merchant account sector, obtaining such an account can be a lengthy process.

In addition to signing up for a merchant account, your account provider will also take several factors into consideration when considering your application.

These include, but are not limited to:

  • Your personal credit history
  • If you’ve had a previous merchant account before
  • Your business history, particularly taking defaults, bankruptcies or liquidations into account
  • The length of time you’ve been doing business for, and
  • The type of business you own as well as its associated risk levels.

Reasons you may need a merchant account

These days, with many, if not most, purchases being made with a debit or credit card, having a card machine, and subsequently, a merchant account to accept these card payments is a vital element of doing business.

It doesn’t matter whether you accept payments through an online shop or through a physical location, a merchant account will be needed nonetheless.

Merchant accounts vs. business accounts

In short, a merchant account is different to a business account. 

A business account enables a merchant to check and manage several items. These include the cash balance, money owed to the business, money owed by the business to creditors as well as the employee payroll.

Therefore, while a merchant account is for card payments, a business account is wider in scope and functionality.

The payment process with a merchant account

Standard merchants accounts follow a specific process for obtaining funds paid by a client. 

In brief, the process from receiving a payment to actually securing the funds in your account is as follows:

Step 1: Your customer pays for their goods/services using their credit or debit card.

Step 2: The customer’s card details are sent from the card reader to the merchant account, which is held with an acquiring bank/payment services provider, together with the details of the transaction, such as the date of the purchase and the amount. The acquiring bank routes this information to the specific card association (such as Visa or Mastercard).

Step 3: The card association will forward the transaction to the customer’s bank (or the issuing bank) to check whether there are sufficient funds in the account for the purchase. 

Step 4: If the customer has the funds available in their account, the issuing bank will send a response to the acquiring bank, through the card association, which will transmit the information to the card reader.

This process, while seemingly complicated, takes only seconds to carry out, although in most cases while the transaction may be instantaneously approved, the funds will not be immediately deposited in the merchant account from the issuing bank.

The myPOS merchant account

If you’re looking for the ideal merchant account, choose myPOS as your partner in payments. Why?

With a myPOS merchant account you get: 

  • A free multi-currency account with a specific IBAN: there are 14 currencies your account can be used with.
  • Instant access to your funds: we believe in empowering our merchants with instant settlement of funds. No more waiting for funds to settle.
  • Cost-effective bank transfers internationally: outgoing bank transfers are super affordable and help you with your business expansion across Europe. 
  • No contracts for rentals: once you purchase your payment device, it’s yours to keep for life. No rental contract, no sign-up, monthly or annual fees.
  • A free Visa business card: wondering how you’ll access your funds? It’s easy! Do so with your very own and free Visa business card which you can swipe, tap, dip or use to withdraw funds at ATMs.

As mentioned earlier, most merchant accounts, once a payment is made into them, make the funds available to the merchant within a couple of days.

However, with a myPOS merchant account, merchants can enjoy instant settlement of funds.

This is ideal for a taxi driver who’s just been paid and needs to fill up his car with petrol. It’s also ideal for beauty studios, hotels and accommodation businesses, restaurants and coffee shops and so much more.

With instant settlement of funds, you’re empowered to make the best decisions for your business, while having your money available to you in real-time.

This makes doing business that much simpler and easier for you!

But in addition to this, you can also: 

  • Use Mobile Top-up to earn additional revenue
  • Offer your customers Private Label GiftCards
  • Send customised invoices with myPOS Invoicing
  • Accept remote payments through the MO/TO Virtual Terminal
  • Implement online payment solutions such as PayLinks, PayButtons and more
  • Get paid after sending your customers simple payment links in the form of Payment Requests

Get paid seamlessly!

This blog post covered what a merchant account is and how it differs from a business account, as well as the process of obtaining funds and how you can get instant settlement of funds through your myPOS merchant account.

As you set out on your business endeavours and think about getting a merchant account, always make sure that you are armed with the right information before making a decision.

While many financial services providers will charge you a hefty transaction fee for each card payment, as well as a rental fee for your card payment device and servicing your merchant account, with myPOS, you can enjoy competitive transaction fees.

You can also get your card terminal going for as little as 29 GBP, which is yours to keep forever and which you pay for only on a pay-as-you-use basis. 

What’s more, your merchant account is absolutely free and comes with a free IBAN!

In closing, consider your business needs and added expenses and think of ways to keep your costs low and your revenue high. At myPOS, we understand every business owner’s needs and strive to provide the perfect payment solutions and merchant accounts to help your business grow.

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