A merchant account is a middleman that allows your business to accept electronic and card payments. In most cases, current accounts cannot handle payments like these directly, which is why a middleman is needed.
How do merchant accounts work generally?
To understand merchant accounts, you first need to understand that there is an acquiring account and an issuing account. The acquiring account is the one that the money is ultimately paid into and the issuing account is where the funds are sourced.
In simple terms, the merchant account sits between these two accounts as a place for money to be securely held while the issuing bank confirms that enough funds are available for the transaction to be completed.
Take the following example:
- A client wants to pay you by credit or debit card for an item
- You provide them a link to a payment provider. We’ll use Stripe as an example
- The client enters their details, and Stripe recognises a payment attempt has been made
- Stripe checks to ensure the client’s account has enough funds to make the payment to you
- While the checks are taking place, Stripe holds the funds in a holding account, also known as a merchant account
- Once the transaction has been processed and cleared, Stripe releases the funds to you minus their processing fee
Are there fees involved?
Typically, merchant account providers charge a small fee per transaction. For example, Stripe’s fees are currently 1.5% + 20p for standard UK cards; however, they vary by provider.
For a full list of providers supported within QuickFile, check out the following: Card and Bank Payment Providers.
In addition to transaction fees, some providers may charge a range of other fees, such as:
- Setup fee
- Monthly minimum fee
- Annual fee
- Batch fee
- Chargeback fee
- Early termination fee
Not every provider charges these fees, so it’s essential to check whether the merchant account provider you choose includes them.
How do merchant accounts work in QuickFile?
Keeping track of your merchant accounts couldn’t be simpler when using QuickFile.
When your client chooses to pay online, simply tag the payment to the corresponding merchant account. Then, once the payment clears and hits your current account, tag it as a transfer from the merchant account to your current account.
If your client pays through QuickFile, we’ll tag the invoice automatically - one less thing for you to worry about!
Remember, because of the transaction fees, the payment released to your current account will differ from the amount the client pays.
You also need to keep track of these fees within the merchant account. When the merchant account provider sends you their invoice, whether monthly or per transaction, create it as a purchase and then tag it as “paid in full from merchant account.”. This will then create the payment in the merchant account for you and balance it out.
QuickFile supports several payment providers as an online payment method and as a feed (pulling in external transactions automatically).
To learn more about how to use merchant accounts in QuickFile check out our support article: Handling payments from merchant accounts for tips on how to create merchant accounts and create transfers between the accounts.