How do merchant accounts work?

So I'm trying to create an online store and so far my leads have turned out great. Salehoo has also been a great source of help. But I'm curious now about how this "merchant account" idea works. I've been researching that there are alot of fees involved etc. I was looking for some advice about which merchant accounts are best to use and which aren't. I've opened a business account at a local bank for my business. But I'm curious to find out how exactly I go about paying my dropshipper without coming out of pocket on any of my personal money. My thought is, that the money I get when someone purchases something will take time to clear my business account so in the meantime, how do I pay the dropshipper???

Some research implied that with a merchant account, the funds are avaliable to me immediately up payment from the customer. But do merchant accounts offer some sort of credit card number or something to pay my dropshipper??

Hope my questions make sense... Please let me know if they don't :)

Hi nmcknight,

We are very pleased to read that you have landed great leads through SaleHoo :)

There are several third party payments processing companies that offer merchant accounts. For example PayPal offers two (2) types of merchant accounts a premier account and a business account.

From what I understand you do not need to pocket out your own funds to pay your dropshipper. Remember with dropshipping you only pay for the item once your customer purchases it from you (your site). With a merchant account the payment clears right away. As soon as your customer makes the payment, the money will be reflected in your account - you can then make the payment to your dropshipper for the ordered product.

To learn more about PayPal's merchant account please visit this link:

Link hidden: Login to view

Hope this helps. All the best :)

Hi nmcknight,

I’d like to share more to answer your question on how merchant accounts work.:)

If you have your own store online or a physical brick and mortar store, and will accept credit card as payment, there should be an arrangement between the bank (termed ‘acquiring bank) and your store/s. The acquiring bank will be providing you with a POS Point of Sale terminal where the credit card gets swiped (or keyed in for online transactions) and the info will be passed on to your acquiring bank, who in turn will send the info to Mastercard or Visa, Amex, JCB (etc). This arrangement is called ‘accreditation’ and once approved you will then have your ‘merchant account’. You will be subjected to a merchant discount rate which varies across banks, which is simply the bank’s cut on your earnings. (plus the other Math).

Hope this helps!

You explained it very well. I have an online merchant acct. but I don't understand how to let the customers know I take credit cards & in what part of my website do I collect their information (credit card #,etc.)? There is no button for the customer to click on that says pay by credit card.
thanks,
debsdarlinz

Hi debzdarlinz,

I think I addressed the same question you posted on another thread - Link hidden: Login to view

Cheers!