A merchant account is described as a kind of bank account which permits businesses to accept payments with the use of payment cards like debit or credit cards. A merchant account is settled or established under an agreement between the bank and the accepting bank. The merchant acquiring bank takes care of the settlement of the payment card transactions. There are instances wherein an ISO (independent sales organization), payment processor or MSP (member service provider) are part of the parties to the merchant agreement. This agreement will bind the merchant to adheretoor strictly follow the operating regulations which are authorized by the card associations.
The merchant agreement is basically a binding contract between a business establishment and the credit card service provider. A traditional merchant agreement includes the rules and as well as responsibilities that apply to each of the party with regards to authorization, payment card acceptance, settlement and processing. This agreement on merchant accounts also establishes the charges and fees that the merchant will pay to the service provider. Every valid merchant agreement will show and as well as explain how the service provider will determine the charges or rates for handling the payment card transactions. The agreement will also define the terms wherein any of the party may decide to cancel or renew their contract. Setting up a merchant account involves the bank understanding the business and also working with a third-party processor which can arrange and manage a standard mechanism for accepting payments.