Merchant Services Explained – The Basics

Do you have a new business and need to set up to process credit cards? If so then you probably understand that you will need to get merchant services for your business by setting up a merchant account. What you may not fully yet understand is exactly how the merchant account works. If you have been processing credit cards for some time now you probably will not benefit from reading this post about merchant accounts since this outline will very basic. However, if you are new to credit card processing and need a merchant account read-on.

A merchant account acts as an intermediary between the credit card issuer’s account and the merchant’s actual bank account. The merchant account compiles the monies that are processed in a given day and moves that money in to the merchant’s bank account. When the merchant swipes a credit card through their credit card terminal the processing company (a.k.a. Merchant Service Provider) checks with the issuing bank to see if the funds are available. When it is found that the monies are in the account they are put on hold. At the end of the day the terminal will either close itself out or be manually closed by the merchant in a process called batching.The merchant account then will move the money from each of the issuing bank accounts over to the merchant’s bank account in one lump “daily batch” total that equals the amount processed; this takes 1-2 business days.

This process will repeat throughout the month as the merchant handles transactions through their merchant account.At the beginning of the following month the Merchant Services Provider takes the processing fees out for the previous months credit card processing. There is a second option on how the fees are taken from the merchant’s bank account called daily discount. In this type of merchant account the base fees come off of the top of the batch before they are deposited in the merchants account.This type of merchant account is preferred in some cases of very large sales,however most merchants prefer that the fees come out the following month due to accounting reasons.

I hope that in being new to merchant services that you have found this basic explanation helpful. If you have any additional questions or need assistance with getting set up to accept credit cards with your own merchant account contact Chris at 800.51.TOTAL /800.518.6825 or visit