A merchant credit card account is necessary for processing payments made through credit lines or payments online, unless you’re going for the more laborious method of taking cash or check only. A merchant account is basically what you open in a bank when you want to process credit cards as part of your business; these merchant accounts are where your money will be coming from at the charge of a small fee for processing the credit card information.

Banks who sell merchant accounts are acquiring bank. This bank promises to process the credit card information you receive, verify it from the bank that issued that credit card (called the issuing bank) and then pay you for what you are owed for a small fee for going through these three steps.

In case of fraudulent credit cards or bad information the banks are liable for the money, meaning that you, the merchant, are still good for what you are owed by the customer. They like to keep an eye on, and set their own rules for, most merchant accounts because obviously lack of care in accepting credit cards will impose more and more liabilities on the bank itself.

If however, it is not you who is duped but the credit owner himself, for instance if his card was stolen, then he will contact his issuing bank to be compensated for the missing money and that liability ultimately falls upon the merchant.

All this is quite a complex network of checks and balances already, and to make matters worst there are a lot of fees and charges associated with merchant accounts that aren’t all the merchant’s headache but nonetheless something they should be familiar with.

These include the initial application fees or account registration fees, the infamous discount rate (the largest of these fees, this is the interest the banks charge on every transaction that you make, typically 2-3%), a non-proportionate and fixed transaction fee which is what you pay every time you send information for processing, monthly minimum fees for continuing to own a merchant account and a chargeback fee if you don’t want the liability of purchases made with stolen credit cards.

The discount rate isn’t fixed either; it varies on the type of transaction made. If you make a particularly high risk/low information transaction you could be charged double or triple the usual discount rate.

So why bother with a merchant account anyway considering all the trials and tribulations, not to mention the seemingly excessive costs?

Well, the basic reason is that it’s what the consumers want. At the end of the day, plastic money suits the consumers not the sellers, or at least not as much; but there wouldn’t be any sellers without buyers so giving in to consumer demand and making them happy is the inevitability of the economic process.

Also, not all the costs are ultimately borne by the merchant himself. Many of these are spread over to the acquiring banks and the credit card issuers themselves.

And lastly, in such elaborate networks there are many safety nets, and especially in online transactions where nothing can be taken for face value (nothing has a face there anyway) safety nets are important for consumer and seller alike.