Methods of payment involving credit cards are more than common in our digital age. As a new business owner, it means that you should, ideally, provide your shoppers with cashless payment options (the alternative being that you miss out on cashless money).

Why, you ask? To give you an example of the extent of credit card usage, in 2014, approximately 5.7 million transactions were made through the National Australia Bank alone during Boxing Day. Thus, it may be a slight understatement to claim that shoppers like to use credit cards.

So how can you go about doing this? You need a merchant account.

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What is a merchant account?

A Merchant Account is your account as a merchant (shopkeeper/ business owner) specifically made for the purpose of holding your funds/payments made from sales. It involves an arrangement with your bank, allowing you to process and transfer credit card payments into your “merchant account”.

This allows any credit card transactions that take place, in relation to your business sales, to be credited to your merchant account upon transactions’ approval. Your Merchant Account company may also provide a payment gateway mechanism. A payment gateway is the service of verifying and approving the card details of your shoppers when they make a payment.

Payment Gateway

Think of a payment gateway as a Point of Sales machine that operates online. So if you ever wondered where the information from a credit goes when you are shopping, here is your answer. The payment gateway receives the information on the credit card as it is used to make a transaction. That information is processed, verified and checked to see if the customer has sufficient funds. If all goes well then the transaction is approved and the money is transferred from the cardholder’s account into your merchant account.

It allows assurance that the card is not stolen or (even worse) expired. Alternatively, you could choose to employ an online authorization company or your bank may provide this service.

You, as the merchant, are responsible for these transactions. Under the agreement, you must adhere to the terms of service of the bank where your merchant account is held.

How can I get a Merchant account?

Every bank has a different process and unique terms and policies that you must follow in order to open a merchant account. It is wise to consult the bank for details and clarity on the process.

For example, with Commonwealth bank, there is quiz on their website to help you decide which plan is best for you. If you are a merchant looking for a method of obtaining online payments via a 3rd party gateway (meaning you choose the gateway company that is separate from the bank), you can opt for an ‘Internet Merchant Account’.

Note: It is recommended that you consult the specialists at your chosen bank to discuss your options.

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Ananya Singh

Ananya Singh

Ananya is currently working in our content team as a Paralegal, aiming to provide free legal guides to facilitate public access to legal resources. Pursuing her interest in the regulation of emerging media, her work centres on the legal and business concerns engendered by the application of traditional legal principles to social media.