Merchant Account Services

Merchant Accounts 101

Everything You Need to Know to About Merchant Accounts


Author: Jim Conners

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Account Types

In the world of credit card processing one size does not fit all. Businesses operate in different manners and this affects the kind of merchant account they will have. It is important for a merchant account provider to establish a merchant with the proper account during the application process as to prevent the many problems that can arise if the merchant is improperly classified. Having the proper merchant account not only helps to keep a merchant's rates to a minimum, thus saving them money, but also helps to protect against fraud and chargebacks.

Retail (Card Present)

A retail business is face-to-face with their customers and can swipe their customers' credit cards through a credit card terminal and process them in real time. Brink n Mortar retail stores are typical examples of a retail business but they are not the only ones. Merchants who have stands at flea markets and have access to a telephone line and electricity can also be retail if they use a credit card terminal at their stand.

A merchant with a wireless credit card terminal is also considered to be retail. Why? Even though they may be standing on a street corner while processing their transaction they can swipe their customers' credit cards through their credit card terminal and process the sale in real time. As a result they get all of the perks and benefits typically offered to a traditional retail store.

Card Not Present

Businesses that are not face-to-face with their customers at the time of sale are classified as Card Not Present (CNP) accounts. These businesses typically take payment in any of the following manners:

  • Telephone
  • Fax
  • Email
  • Mail

The one thing they all have in common is that the merchant is not face-to-face with the customer at the point of sale. These transactions are usually keyed into a credit card terminal or POS software.

Another for of CNP business is merchants who perform recurring billing. Although the very first transaction may occur in a retail environment (face-to-face with the merchant and swiping the credit card through a credit card terminal) every recurring transaction afterwards will not be swiped. Because these recurring transactions comprise the majority of the transaction for this merchant they would be considered a CNP merchant.


An Internet business is very similar to a CNP business. The distinguishing characteristic between the two is how the customer's credit card information is acquired. An Internet merchant acquires their customers' credit card information through their website. The customer's information is physically captured and transmitted through the merchant's website.

A business is not considered to be an Internet business for the following reasons:

  • A company has .com in their business name
  • The website that advertises their products but does not take payment
  • Customers place an order over the phone by reading the contents off of the website
  • The merchant uses a payment gateway to process their transactions

Although some of the situations listed above are characteristics of an Internet business, unless payment is accepted through the merchant's website, the merchant is considered to be a CNP business.

See our blog post Three Websites, One Merchant Account? to see how you should handle operating multiple websites and merchant accounts.


A mobile business is very similar to a retail business. They are face-to-face with their customers at the time of sale. The main difference is that a mobile business does not have the means to process the transaction in real time. Typically this is the result of a telephone line or electricity being available at the point of sale.

To compensate for the lack of resources to process a transaction in real time, a mobile merchant typically uses a manual imprinter to capture an imprint of their customers' credit cards and obtain a signature. This allows them to manually process the transaction at a later point in time. It also offers the mobile merchant additional chargeback protection typically reserved for retail merchants.

See our blog post How to Process Credit Cards at a Fair or Market to see how a mobile business may operate.

Seasonal Businesses

A seasonal business is only open for a specified period each year. This period is consistent and does not change from year to year. For example, a Xmas decoration store will be open every year from October through December. They won't need their account from January through September. Seasonal businesses can have their accounts closed for the off-months each year during which they will incur no fees including their monthly service charge.

Typical seasonal businesses include:

  • Landscapers
  • Fireworks sales
  • Xmas/Holiday-based
  • Some tradeshow merchants

Seasonal merchants cannot open and close their account at random times. The months they wish to be closed must be determined during the application period. They may vary slightly based on the needs of the merchant but this is on a case-by-case basis. Merchants who were not declared seasonal during the application process typically cannot close their account on a temporary basis. 1

1 Seasonal Merchant Accounts

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