A Merchant account is an account that allows you to accept and hold credit card transaction monies. If you are going to be operating an e-commerce business, you must have a merchant account. Without a merchant account you cannot accept credit cards.

Once a relationship with a merchant account provider or acquiring financial institution is set up, the institution then deposits daily credit card sales into the merchant's account after deducting certain fees. Some financial institutions also conduct merchant services, either in-house or out-sourced to third parties. Such services include customer service, billing, authorization, reporting and settlement services. Third-party companies offering these merchants services include First Data Corp., Global Payment Systems and Nova Information Systems.

These accounts can be established through merchant service providers (MSPs) such as banks or via independent service organizations ISOs). Many people feel more comfortable dealing with their business banker as banks are generally viewed as secure and reliable, but many banks can be clue-impaired when it comes to merchant accounts. Many banks will have no idea what you are talking about or will work from a very short list of credit card processing systems. Banks are also much more selective when deciding for whom they will open a merchant account. And lastly, banks generally take a long time to establish a new merchant account, often 2 to 3 weeks. ISOs on the other hand are extremely knowledgeable about merchant accounts as that is their primary business. ISOs tend to be more flexible and are willing to accept more risk, since they are neither monitored nor regulated. They also are able to get new merchant accounts processed in less than half the time a bank takes.