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FAQ, Comparison and Guide to Merchant Accounts and Payment Gateways

Guides, Resources, and Top Vendors

by Bernard Kohan

Who is a Merchant?

A Merchant is a business who accepts credit cards.

What is a Merchant Account?

A Merchant Account is a type of bank account that will provide businesses with the capabilities to accept credit and debit cards.

What is Merchant Account Service?

Merchant Account Services is to service a Merchant Account including Payment Processing, sales and customer service, technical support, providing the monthly statements, etc..

Do I need to qualify for opening a Merchant Account?

Yes - Merchant Account providers will perform a personal credit check on owners of small businesses and will inquire about business particulars such as type of business, products or services, and sales information in order to provide Merchant Account.

There are some exception to that rule. Some organizations may allow you to use their Merchant Account to accept credit card. They will charge a larger fee or discount rate in order to justify the risk. They may also hold on to the funds for a longer period in order to guarantee that there is no issues with the transaction.

Also, PayPal may not require a credit check on personal accounts.

Bare in mind that if a Merchant Account Provider does not require a Credit Check, it will find a way to reduce the risk by providing a very small credit limit or holding on to the charges for a longer period in order to allow time for complains and returns.

Is there a "Credit Limit" on the amount of charges per month?

Yes - It is important to note that when you open a Merchant Account, you are assigned a credit limit. This is the monthly limit on the amount of credit card charges that you can accept.

If you are predicting to have for example on average $100K of credit / debit charges per month, you want to sign up with a Merchant Services that is capable and is willing to extend you $100K per month limit on allowed charges.

Why there is a "Credit Limit"?

Because on many occasions, dishonest Merchants sold inferior products, collected and pocketed the charges and ran away. Consumers called the Credit Card companies to complain and get their money back, but it was too late, the dishonest Merchant filed bankruptcy and laundered the money.

What is Payment Gateway?

If you have an online shopping cart and need to take credit / debit card and process it online in real-time, you will need a Payment Gateway service in addition to an Internet Merchant Account. This is because the Shopping Cart Applications are not allowed to communicate (send and receive the transaction information) to Payment Processors directly for security reasons. A Payment Gateway service company has gone through the extensive and lengthy process of getting approved and pass the requirement to communicate with Payment Processors. A Payment Gateway company acts as the mediator for communicating the transaction information between the Shopping Cart Application and Payment Processors.

What is Payment Processing?

Payment Processing includes the following procedures:

  • Receiving transaction information from Merchants via phone line or Internet
  • Sending transaction information to the corresponding financial institution
  • Receiving approval / declined information from corresponding financial institution
  • Sending approval / declined information to Merchant
  • Upon approval, settle the transaction from the corresponding financial institution
  • Deposit funds into the merchant's bank account

What are the different types of Merchant Accounts?

Retail Merchant Account — This type of account is for retail store businesses where customers present and swipe their credit / debit cards. The rates for retail type merchant account is usually lower because there is less risk for fraudulent transactions. Some merchants make a mistake of signing up for a retail merchant account without having a retail store in order to get a better rate. However, if the credit / debit card is not present or swiped, the payment processor automatically tags the transaction as a phone or online transaction which will be charged at a substantially higher rate, even higher than a Mail Order Telephone Order / Online Merchant Account (MOTO Merchant Account).

Mail Order / Telephone Order (MOTO) Merchant Account — This type of account is for businesses which customers do not present and swipe their credit / debit cards. The rates for MOTO type merchant account is usually higher because there is more risk for fraudulent transaction.

Internet Merchant Account — This type of account is similar to Mail Order / Telephone Order (MOTO) Merchant Account above (with similar rates, terms and agreements). Some Merchant Service Providers will use the same class of account for Internet and Mail Order / Telephone Order (MOTO) accounts and some Merchant Service Providers will use a different class of account with a more customized services tailored toward an Internet Account.

Also, most Internet Merchant Accounts will require a Payment Gateway Services in order to process credit / debit card payment in real time when using a Shopping Cart Application. This is because the Shopping Cart Application is not allowed to communicate with Payment Processors directly (for security reasons) so the Payment Gateway Company acts as the mediator to communicate (send and receive) the transaction information to Payment Processor.

Who are the Payment Processors / Acquirers?

There are only a very few specialty financial institutions and banks that provide payment processing. Payment Processors are very large companies that usually like to stay in the background and focus on Payment Processing rather than dealing directly with consumers, small businesses or Merchants. They have reseller or partnership agreements with Banks, Independent Sales Organizations (ISOs), or other companies who can resell their services. However, sometimes you can order Merchant Services directly by visiting Payment Processor's site, you may not get the best deal or the right Merchant Account due to the fact that there is very little effort is put into selling directly to small businesses by large Payment Processors.

Below are the top Payment Processors / Acquirers:

  • Chase Paymentech (subsidiary of JPMorgan Chase)
  • First Data Merchant Services
  • BA Merchant Services (subsidiary of Bank of America, NA)
  • Elavon (subsidiary of U.S. Bancorp.)
  • Heartland Payment Systems
  • Global Payments
  • Fifth Third Processing Solutions
  • RBS WorldPay (subsidiary of Royal Bank of Scotland group)
  • First National Merchant Solutions (FNMS) (subsidiary of First National Bank of Omaha)
  • TransFirst
  • Alliance Data

Who provide Merchant Account Services?

This industry is very complicated - there are so many third parties and different service providers involved that would make getting a merchant account confusing and cumbersome.

Merchant Account Services are provided by one of the following organizations:

  • Merchant Services division of large banks (for example: Wells Fargo Merchant Services or Bank of America Merchant Services)
  • Independent Sales Organizations (ISOs) or Member Service Provider (MSP). These organizations are the resellers of one or more of payment processors. This category is the largest category of Merchant Services providers. Some large ISO companies take larger part in providing the overall merchant services to Merchants. For example, a various ISO companies provide underwriting, qualifying the Merchants, take liability for Merchant's default, furnishing monthly statements, terminal deployment, support in addition to sales functions. (example of those companies are Intuit Quickbooks Merchant Services or United Bank Card Merchant Services.
  • Independent Contractor Agents that have contracted with an ISO / MSP to perform sales for those companies.
  • Banks or other Financial Institutions who partner or have a contract with a payment processor. (for example: Union Bank partners with Elavon or CitiBank or Wells Fargo contracts with First Data)
  • Other companies who partner or have a special contract with a Payment Processor or Merchant Service Provider to provide or Sell Merchant Services. (for example: Costco partnering with Elavon to sell Merchant Services to small businesses)
  • Payment Gateway Companies who partner or have ISO agreement with a Bank or Credit Card Processor to provide Merchant Services (for example:

Who do I recommend for Merchant Account Services?

It depends on your needs. Each Merchant Service Providers have their own advantages. Below are a few selective Merchant Services and my thoughts about them: — has been providing Payment Gateway services for ecommerce / shopping cart application Merchants since 1996.

In my opinion, is best suited for small to mid-size companies that are needing ecommerce / shopping cart applications.

Here are the advantages

  • The most experience in ecommerce / shopping cart application industry
  • Good customer service and support for troubleshooting charge issues
  • Reasonable rates
  • More lenient and easier to qualify
  • Easy / convenient online application
  • Ideal size for servicing small business service - not too large or too small
  • Provides both Merchant Account and Payment Gateways Services
  • Easy to setup with most eCommerce / Shopping Cart Applications

Comentum is a Partner / Reseller of services. If you would like to sign up for Merchant or Gateway, please click: Online Application

Costco / Elavon — Costco / Elavon offers a very competitive rates for their Merchant Services. They are most experience in retail type Merchant Accounts. Here are the advantages of Costco / Elavon:

  • Very Competitive Rates
  • The most experience in retail industry
  • Good customer service
  • Provides both Merchant Account and Payment Gateways Services

Intuit / Quickbooks Payment Solutions / Merchant Service — Intuit / QuickBooks Payment Solutions is ideal for businesses that use QuickBooks for their accounting software and using QuickBooks Merchant Services will help automate the importing or automatic entries of all transactions.

For example, if a business takes recurring monthly payment and also uses QuickBooks accounting software, QuickBooks merchant automatically imports all recurring transactions into QuickBooks accounting software or if a mail order business uses QuickBooks accounting software and gets several credit card orders per day that can easily be entered into QuickBooks once, it makes sense to use QuickBooks accounting software in conjunctions with QuickBooks Merchant Services.

However, for ecommerce and shopping cart applications, QuickBooks Merchant Services is not as ideal because there is no automated methods from QuickBooks to import the transactions from a shopping cart application to QuickBooks software.

Also, Intuit / QuickBooks acquired Innovative Merchant Solutions (IMS) in 2003 which gave Intuit the ability to enter the Merchant Services Market. IMS's focus has been mostly on retail and mail order business and not so much focus on Internet transactions or ecommerce / shopping cart systems.

Here are my thoughts on Intuit Merchant Services:

  • Ideal for Merchants that use QuickBooks accounting software and require a large number of transactions integrated or imported to QuickBooks
    (not so ideal for ecommerce / shopping cart applications that require automatic importing to QuickBooks using QuickBooks accounting software.
  • Do not have as much experience on ecommerce / shopping cart applications.

Wells Fargo Merchant Services — Wells Fargo Merchant Services is ideal for mid-sized to large business that require a solid bank that can provide a large credit limit to allow for substantial amount of credit charges per month.

Wells Fargo Merchant Services also has a good experience in Internet Sales and eCommerce / Shopping Cart applications.

Wells Fargo Merchant Services does not use their own Payment Gateways for Internet / ecommerce type Merchants. They use Payment Gateway.

Here are the advantages for Wells Fargo Merchant Services:

  • Ideal for Merchants that require large credit limit for substantial charges
  • Good experience in ecommerce / shopping cart application industry
  • Good customer service and support for troubleshooting charge issues
  • Reasonable rates
Bernard Kohan

Bernard Kohan is a mobile app and web application development and technology analyst expert. He is available to discuss any issues or questions you have about web development and the best choices for your company or project.

Bernard can be reached at

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Selective Merchant Account Providers Comparison Costco / Elavon Merchant Services Intuit / QuickBooks Merchant Services Wells Fargo Merchant Service Chase / Paymentech Merchant Service
Overall Rating
my opinion
Rates and Fees
Experience in eCommerce / Shopping Cart Applications
Experience in Retail Merchant
Lenient toward Qualifications
Easy Online Applications Process
Both Merchant Service and Gateway Processing NO NO NO
Merchant Support, Gateway API, eCommerce Gateway Support
large Merchants requiring large credit limits for significant monthly charges
Merchants that use QuickBooks accounting software and require a large number of transactions integrated or imported to QuickBooks
*Above ratings are based on my opinion and experience.

Comentum is a Partner / Reseller of services. If you would like to sign up for Merchant or Gateway account, please click: Online Application