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How does a Merchant Account work?

11 Mar 2022 By PAYCEC

A merchant account is a sort of company bank account that lets companies accept electronic payments like debit and credit cards. The merchant account serves as a link between the online card payment and the money being deposited into a business account.

  • How does the merchant account work?

When customers make a purchase, the funds must first be authorized and processed before they can be deposited into the merchant's account.

A few safeguards are in place to protect merchants from card fraud and to ensure that the consumer has the funds to pay for merchants. The money is paid directly to the merchant account after their customers' card payments are checked following the transaction.

Most merchants rely heavily on merchant accounts to run their businesses. When it comes to selecting a merchant account service provider, merchants have a number of options, with transaction costs playing an important role. Merchant acquiring banks, which work with merchants to facilitate electronic payments, provide merchant accounts.

If a brick and mortar business chooses not to accept electronic payments and only accepts cash, they do not need to open a merchant account and can instead rely on a basic deposit account at any bank. However, because electronic payments are the only option for online businesses, they must establish merchant account partnerships as part of their business operations.

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