If you have a business and you want to accept credit cards as a method of payment, you’re going to need a merchant account. From the small mom and pop shop down the street to the biggest and best of department stores, all businesses that take credit cards must have their own merchant account. So what exactly is a merchant account?

A merchant account is the single most cost-effective way of accepting credit cards from your customers or clients. A merchant account involves an arrangement between you and a credit card processor. This arrangement allows you to accept credit card payments from your customers. Those payments are then deposited into your bank account.

There are two main types of merchant accounts. A “card present” merchant account and a MOTO (mail order/telephone order) or Internet merchant account. With a “card present” account, the credit card is actually present at the time of the sale and is swiped through a credit card terminal. With a MOTO account or an Internet transaction account, the card is not present and additional approval is required.

In order to get a merchant account, you’ll need to fill out an application and have it approved by a credit card processor. While banks offer merchant accounts, they’re not always the best place to turn to for your merchant account needs as their application process is a bit more stringent than other types of merchant account providers, plus they do not typically offer any advanced processing solutions such as wireless or web based processing.

Once you’re approved for a merchant account, you’ll need a way to process your transactions. This will involve using either a Point of Sale (POS) credit card terminal, credit card processing software or an Internet payment gateway. Once you decide which is right for you, you’ll need to program your merchant account into the software or the terminal that you will be using.

Once your merchant account is programmed and ready, you can begin to process credit card transactions. If the transaction is approved, the amount of the transaction is credited to your merchant account. If the transaction is not approved, the amount will not be credited to your merchant account. At the end of the day, the total of funds in your merchant account are settled and transferred to your bank account. Typically that process takes two business days.

Some merchant account providers will require you to set up a bank account with their bank in order to have a merchant account with them. However, there are others out there, like Merchant Accounts Express, that do not require you to do this and allow you to bank wherever you choose.

It is best to use a merchant account that will let you bank where you choose to bank, as the merchant account is a totally separate account from your regular bank account and you may have needs for your bank account that the merchant account provider can not meet.