A merchant account is commercial bank account that can be obtained by a contractual agreement between a merchant and a bank and/or payment gateway. This agreement will include information such as the rights of the merchant and the bank or payment provider, and the duties that need to be followed when accepting bankcards like Visa or MasterCard. A merchant account is an essential requirement for any merchant who want to process payments via credit cards. Money received from credit card payment is first held in the merchant account and then transferred to a business account in real time or during various points in a 24 hour period.
Heres, a look at how a merchant account works. When a consumer decides to purchase a product or service online, they need to fill out all details related to the purchase. Details that need to be provided include information on the products they want to buy, their name, address and credit card information. Such details are necessary in order to process the sale.
After completing the online form, the customer will submit the form, by clicking the "Submit" or "Pay Now" button on the order confirmation checkout page. This begins the payment process, whereby the customer account is debited with the amount to be paid and this amount is credited into the merchants account.
When the button is clicked, the clicking triggers a process as the button is linked to the AuthorizeNet Secure Gateway which routes and obtains the credit card authorization or declination code. The credit card is checked against the Address Verification System (AVS) to authenticate the cardholder. Though such authorization reduces the available credit limit on the customer credit card, it does not put a charge on the statement of the cardholder or move any money to the merchant.
In accordance with bankcard association rules, any merchant cannot fully complete their transaction until they have shipped ordered goods to the customer. Due to this reason, there is a time lag between the time when the customers credit cards were authorized and when the customer actually received the goods ordered.
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Catherine Joesph - How does a merchant account work?