Accepting cash, like bartering with chickens, is no longer viable as a primary means of accepting payment. To compete in today’s world, businesses of all sizes must accept credit and debit cards. However, there is a technological requirement for this golden payday. A merchant account is necessary to accept card payments.

There are dedicated merchant accounts, belonging only to one merchant, and there are aggregate merchant accounts that are utilized by many vendors and are made available by companies such as PayPal. Both options have pros and cons. However, aggregate merchant accounts can be especially troublesome for the responsible business owner. The downside being that the account is shared by many vendors and one bad egg can spoil the bunch. A dedicated merchant account is a more controlled approach to accepting payments by card, either in person, online or over the phone. This type of account is assigned to a single merchant by an issuing bank. This vendor will not be penalized for the activity of others, as is the case with aggregate merchant accounts.

In order for a small business to obtain a merchant account, they must apply, be underwritten by an authorized processor and agree to all terms and conditions necessary to accept credit cards according to the contract between the issuing bank and the acceptor. Once accepted, the issuing bank establishes a merchant account and provides the vendor with a merchant ID, a unique numeric identifier by which each account is recognized by all parties within the processing network. The issuing bank uses the merchant ID to know which merchant originated a transaction and where the funds should go.

Merchant accounts are a revenue-generating superpower that can’t be ignored. They help to equal the payments playing field between varying sizes of businesses, vying for the same marketplace. Advancing technology makes it easier than ever to establish a merchant account without skipping a beat in the day-to-day responsibilities of running a small business.

Megan Paladino

Megan Paladino

My name is Megan Paladino and I joined PaySimple as a marketing manager in 2012. I love wearing many hats and our lean, mean marketing team allows me to do just that. When I'm not in the office, I'm busy searching for new happy hours around Denver and tending (urban) farm.

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