What is a Merchant Account?

A merchant account is a type of business bank account. A business bank account is an account which helps a businessman/woman to keep his/her business transactions separate from his/her personal transactions. This type of account is beneficial to those merchants who make payments in electronic form. Hence a merchant who does not make any electronic money transaction need not maintain a merchant account.

A merchant is a person whose job is to buy and sell goods of one particular type and in a large amount.

Merchant account involves an agreement between an acceptor i.e. the merchant and a merchant acquiring a bank for the settlement of payments. When a merchant enters into this agreement he will be contractually liable to obey the operating regulations established by the card associations.

The merchant account agreement contains all the terms and conditions as per which the relationship between the acceptor and the bank is based. It includes per transaction cost that the bank will charge or any other monthly fees charged by the bank etc.

In India PAYTM provides merchant account services. PAYTM has launched this service on December 20, 2016, in which they enable self-declared merchants to transfer up to INR 50,000 directly in their bank account. PAYTM currently do not charge any fees to transfer such amount. How to pay your credit card bill in India using a different bank account

Any person who operates an e-commerce business i.e. a business involving buying and selling of goods and services over the internet, such an e-commerce operator accepts payment online through debit/credit card then he needs to have at least one internet merchant account.

To minimize the risk a variety of criteria is used to determine whether to approve merchant account application or not. This criterion includes the following some conditions:

• Type of business – i.e. whether it has a high or low risk of credit card fraud or returns
• Length of continuity of business.
• History of business transactions.
• Whether the applicant holds any merchant account in the past.
• Personal credit history of the merchant.

Having a high risk does not mean that your application is rejected, it just means that the vendor i.e. the merchant may demand a higher transaction initially or other fees to compensate for the risk. If the business is successful the fees can be renegotiated at a later date.