The Essentials of Merchants – The Basics

A Simple Understanding Of the Types of Merchant Accounts

A merchant account is simply a contract that is made between a business and a financial institution like a bank. This contract entered into by these parties would mean that the financial institution is bound to accept payments for the products or services delivered or rendered to customers or clients of the business as alternative mode of payment to them. These merchants acquiring banks then makes sure that a company can accept payments even from those abroad or from international clients, if any, for the products they deliver or services they render to them. It is therefore safe to say that merchant accounts is a vital part for businesses, especially the big ones.

There are only two types of merchant accounts that businesses can choose from.

The first one is the normal account which is the type of merchant account where the merchant has a direct access to the card so this is a way for them to be sure that the customer is legitimate which means that the risk that if in case there is a risk involved, it will just be very minimal. The other type of merchant account is when it is not at all a possibility for the merchant or the business to visually testify the client or the customer. Some of the accounts are but not limited to adult entertainment merchants, replica merchants, multilevel marketing merchants, and other transactions where transactions take place where the customer or client need not be actually or physically present for the transaction.

There is then a higher probability that fraud activities are much greater with the businesses classified in this type and this then result to having these types of accounts be classified as the “high risk” accounts. It is safe to note or even to imagine that these high risk merchant accounts also entails the risk of having charge backs for the banks that are in question. These factors that are cited including some other reasons on top of anything else, are some of the reasons as to why there is decrease in the number of banks that are willing to or are open to take up high risk processing accounts.

It is true indeed that several years ago, there are many banks that are undeniably scared especially the small ones but, nowadays, a lot of big, well known banks are ready to offer high risk merchant accounts.

These high risk merchant accounts are personalized accounts and the banks are studying them carefully well then after some time whey will arrive at conclusion or conclusions on the rates that they should impose for every transaction entered into.

On top of everything, banks that are offering high risk merchant accounts are advising the merchants that they open other accounts to ensure diverse methods of payment so that even if there will be an issue or difficulty when it comes to one account, there will be another option.

Reference: my company