An Outline of the Different Types of Merchant Accounts

How Payment Processors Classify Merchant Accounts

A merchant account is a specific type of bank account that allows merchants (service/goods providers) to accept payment by credit or debit card. If you own a business and want to start accepting payment by card you will need to set up individual accounts with a bank that offers a card you want to accept. After you have established your merchant accounts you will need credit card processing software, and credit card terminals in order compile the information and send it to the credit card processing company and banks.

Payment processors classify merchants into specific categories based on how they conduct transactions and collect card information.  The two main categories, Swiped and Keyed, reflect how the card information is collected.

Swiped Merchant Accounts Swiped Merchant Accounts “Swiped” merchant accounts have face-to-face interaction with the customer, and collect information by swiping the card through a card terminal.

Included in this category are retail merchants who conduct business in a store or office where they meet with customers face-to-face and physically swipe their cards. Restaurants that don’t process tips are still considered retail merchants. Restaurants that do process tips are under their own sub-category.

Lodging merchants are a third example of a “swipe” category merchant account. This includes hotels, motels etc.


Keyed Merchant Accounts

Merchants that fall under the Keyed category do not have the card-holder present to conduct the transaction.

Keyed Face-to-Face merchants eventually meet the customers in person to complete the transaction, but take the order by phone, Email or over the internet. They then put the card information in by hand. Examples are delivery services like flower shops or pizza places. Pizza restaurants, depending on the payment processing company, may have to establish one Swipe merchant account and one Keyed merchant account to be able to provide both services.

Internet merchants conduct all their business through their website. All card and transaction information is collected by a payment gateway that is built into the website. Once the sale is confirmed the card is charged instantly. Businesses that only market on the internet but have brick-and-mortar stores do not fall into this category.

Mail and Telephone Order merchants collect order information and credit card information by phone, fax or internet and manually enter the card information into a credit card terminal or computer software. Once the payment is confirmed they ship the product to the customer.

Why Merchant Account Types are Important

With merchant accounts, payment processors and banks there is always variability. Depending on if you’re based in New York, or California, or Arizona, the rates are sure to be different. The same goes for what you’re business offers and how you plan to receive card information. So, knowing your merchant account type allows you to shop the rates and perks of different payment processors and find the one that best caters to your needs. Establishing merchant accounts will help your business become the successful enterprise that you have always envisioned.

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