What is a Merchant Account?

A merchant account is a bank account established by contractual agreement between a merchant/business and a payment processor/bank for the settlement of credit and debit card transactions. A merchant account enables a business to get money from their customer's credit and debit cards transactions into their local checking account. A business does not have to setup a new separate checking account to establish a merchant account but instead can use the current checking account that it has with it's local bank. If a business operates as either a sole proprietorship or a partnership, a personal checking account can be used as a merchant account. If a business operates as a corporation or an LLC, a business checking account is required.

What is a merchant account discount rate and transaction fee?

Merchant account fees are broken up into two parts: the discount rate and the transaction fee.

The discount rate is the percentage rate taken from each transaction. Because the discount rate is a percentage of the total ticket amount, the amount deducted from the business's merchant account will vary depending on the ticket size. On the other hand, the transaction fee is a fixed amount taken from each transaction that always remains constant. For example, if a merchant has a credit card sale for $100 and the discount rate is 1.69% and the transaction fee is 25 cents, the calculations are: ($100 x 1.69%) + $0.25 = $1.94. In this example, $98.06 is deposited into that business's merchant account and $1.94 is deducted to pay for processing the transaction. Let's now say the credit card sale is for $1000, and the discount rate again is 1.69% and the transaction fee again is $0.25, the calculations are: ($1000 x 1.69%) + $0.25 = $17.15. In this example, $982.85 is deposited into the merchant's merchant account and $17.15 is deducted for processing the transaction. As you can see the amount taken for the discount rate varies depending on the ticket size, where as the amount taken for the transaction fee stays the same.

What is the difference between "Card Present" vs. "Card not Present" transactions?

There are two different types of credit card transactions, "card present" transactions and "card not present" transactions. A transaction qualifies as a "card present" or "swiped" transaction when the customer and credit card are present at the point of sale. In this scenario, the card is swiped through a credit card processing system (credit card terminal, POS system or card reader) that obtains the card holder's information by reading the black magnetic stripe on the back of the card. A transaction qualifies as a "card not present" or "keyed" transaction when the credit card information is keyed into a credit card processing system (credit card terminal, POS system, software program, or payment gateway) usually without the credit card or customer present at the time of the sale. The discount rate for a "card not present" transaction is slightly higher than that of a "card present" transaction because the likelihood of fraud is greater when the card is not present at the time of the sale.

What other fees should I expect with my merchant account?

When shopping around for a merchant account be sure to ask about the following potential fees: Setup Fee, Application Fee, Early Termination Fee / Cancellation Fee, Annual Fee, and per transaction differentials. While many of our competitors will apply these fees, National Bankcard takes pride in not charging our customers with any of these fees.

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