One of the first steps in setting up a business is preparing to accept credit card payments—either in person, over the phone, or through an online shopping cart. In order to do so, merchants must set up a business merchant account.

But what is a merchant account?

A merchant account is a type of business account that allows merchants to accept credit and debit card payments. Typically, merchants set up merchant accounts through credit card processors, although some banks provide merchant processing as well.

Merchant accounts are usually provided by credit card processors, which are companies that facilitate the exchange of communication and funds between the multitude of entities involved in a credit card transaction.

The three main entities acting in every transaction are:

• The merchant,
• The cardholder or customer, and
• The credit card processor.

For every credit card transaction, a complex process occurs in only a few seconds, with messages pinging back and forth between several different entities, including the card-issuing bank, the customer’s bank, the merchant’s bank, and the credit card network.

Basically, all of these separate entities must communicate with one another in order to approve, secure, and transfer funds.

This is where the credit card processor comes in.

Essentially, the credit card processor is the entity that facilitates this flurry of communication. The end result is that the merchant receives the funds in their bank account when they settle their transaction batch at the end of the day.

On top of processing, credit card processors may provide additional services to merchants, such as detailed information and reports about transactions, including total funds and types of cards processed, and even chargeback notifications. Depending on the reporting functionality of your credit card processor, this information may be more or less granular.

When choosing a merchant services provider, it’s imperative to find a company that’s a good fit for the business. Consider your needs, and determine which provider can best meet those needs. Keep these key features in mind:

• Is there a strict contract or fees for switching?
• Hidden fees. Will you be saddled with unexpected fees?
• Customer support. Does the provider offer in-house support?

Credit card processors often get a bad rap, and it’s certainly wise to be selective when choosing a processor, but there are quality processors out there who want to partner with merchants rather than ripping them off.

If you do your research, you’ll find a reputable processor who can be a trusted partner—and not a pain in the neck.

Though merchant processing can be confusing at first, and choosing a merchant account can be daunting, there are plenty of resources available to business owners to help them make informed decisions.

With the right credit card processor, setting up a business merchant account will open up your company to new payment methods, new customers, and new data, allowing you to grow and change for the better.