Merchant Accounts Explained

If you’re planning on taking payment via debit or credit cards within your business then there's no doubt about it, you’re going to need a business merchant account. So, what exactly is one and why do you need it?

What is a merchant account?

A merchant account is an online bank account that's set up so you can take credit and debit card payments. Different to choosing your business bank account, it acts as a holding place to keep funds until they are released to your business account.

How do merchant accounts work?

Essentially, your merchant account will process every single debit and credit card payment you take. It will then take away a flat rate fee or percentage and does this for every single transaction. Then it will release the remainder straight into your business bank account. This all happens automatically so you don’t have to lift a finger.

Most payment processing companies allow you to log in online where you can see every transaction made. This also helps you track sales and sort out any discrepancies if needed. A really handy feature and pretty easy to get the hang of once you know what you’re doing.

Are there different ways I can take payments?

There sure are. Whether you have a brick-and-mortar shop or are away on the road, you’ll be able to take payments. Below are some of the ways you can take payments with a merchant account.

Countertop Card machine

The kind of terminal that you’re probably used to seeing in shops. It’s usually connected to the side of the till and accepts payments from all major card providers. Not forgetting contactless, android pay and apply pay. This type of terminal plugs right into your phone line or broadband.

Portable card machine

These are the ones you would use in a café or restaurant where you can pay your bill from the comfort of your seat and can be used up to 100m from the base.

Mobile card machine

Out on the road or at an event? These can be used anywhere in the UK so you can take payments and each transaction will still be logged on your merchant account online.

Payments online and over the phone

Fear not, you can seamlessly take online payments through a payment gateway. This is connected to your website and your merchant account so customers can easily make payments. So, if you’re running an eCommerce site, this option would be perfect for your business needs.

Phone payments can also be made by entering your customers’ information into a virtual terminal. Essentially this is an online version of a card machine which is directly connected to your merchant account.

How much does it cost to open a UK merchant account?

Getting a merchant account shouldn’t break the bank and there are some really cost-friendly ones around. Once you have the account, you’ll have two main fees to pay.

• A monthly fee for leasing your card terminals from the machine provider.
• A transaction fee that you pay on each transaction made. This could either be based on a percentage or a flat rate fee.

In a lot of cases, merchant accounts are usually free to open. This is perfect for setting up a merchant account for a small business.

Setting up a merchant account

If you’re ready to open a merchant account, here’s what you need to do next:

You'll need to understand your business needs and which kind of merchant services you require, and what provider can help you the most. So go ahead and shop around and get quotes from a few providers, helping you get the best deal possible. The merchant service provider will usually need to know a few things to accurately calculate your quote.

These will typically include:

• The type of business you run
• The products and services that you offer
• Your current and expected turnover
• The average value and frequency of your current and past transactions
• Which transaction is more popular in your business, credit or debit card?

When you’ve accepted your quote and the bank who will be managing the money has approved your merchant account. You’ll now be assigned a merchant ID. This connects you to your merchant account. And voilà, you’re ready to start taking payments.

To wrap up, figure out what your business needs are. Have your information ready for the merchant service provider. Shop around, get a good quote, get approved and get on with making quick and seamless payments straight away!

If you’re a startup business setting up your merchant account for the first time, or an established business ready for the next stage of growth, Capalona can help you compare the right funding to help you reach your business goals. Compare business funding here.