Businesses must apply for an online merchant account with an application to one of the merchant services providers, notes Shopify.com. These online accounts are meant to temporarily hold funds from credit and debit card transactions until the merchant processor can confirm approval of the payment from the provider such as Discover or Visa.
Businesses need to get a merchant account and a payment gateway to process credit and debit payments. Some services provide a double package of these to businesses, but they must get approval first. Essentially, the business applies for the merchant account by providing an application and relevant documentation such as the financial history and processing information. The business owner must also have a business checking account that money is deposited into after it is finished processing.
These merchant accounts are connected to the business through a payment gateway, which can include a point of sale transaction machine and the processing software on it, states KathrynAragon.com. Once the credit information is provided and the initial sale completed, the gateway sends the credit card information to the merchant account.
The account operator sends some of the information to the credit provider for final approval of the sale. This information is sent back with approval to transfer money from the cardholder account to the merchant account. Once in the merchant account, a small fee is deducted by the operator and the remaining funds are sent to the company's bank account.