What you need to know about merchant service.

A merchant service is a special bank account or line of credit that allows
businesses to accept credit cards from their customers for purchases. The merchant
account provider has contracts with acquiring institutions to process credit
card transactions for their customers. All merchant accounts must be approved
by both the merchant account provider and the acquiring institution.

Merchants should have an existing business in order to obtain an account. They
can be operating either as a corporation or a sole proprietorship. There will
be legal documents that need to be submitted to verify the nature and purpose
of the business before approval is given for the merchant account. There are
other requirements such as social security number and federal tax ID. An inquiry
should be made to the chosen merchant account provider to verify if there are
other specific requirements that need to be given.

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There are basically two kinds of accounts. One uses a point of sale (POS) terminal
where card is swiped in a face-to-face setting such as those frequently seen
in retail stores. The other uses an internet payment gateway for businesses
conducted through a website. This facilitates purchases without the need for
direct contact.

Most local banks do not directly process credit card transactions for their
customers due to their other various responsibilities. They opt to use a partner
merchant service provider to handle these transactions. Banks, being inherently
conservative by nature find the credit card industry too risky which gave rise
to the proliferation of merchant service providers. It is quite interesting
to know that most banks do not have the licensing required for credit card processing
like merchant service providers do.