What is a Third Party Merchant Account?

Nicole Madison
Nicole Madison

A third party merchant account is really a type of payment processing account. Typically, a business that needs to process credit cards secures its own merchant account. In some cases, however, a business owner may use another company to process credit card payments for him by opening a third party merchant account. Often, this type of account is easier to obtain than a regular merchant account and offers secure payment processing via links on a company's website or a website shopping cart. There are usually fees associated with this type of account, however.

A third party merchant account allows online merchants to process credit card payments from consumers.
A third party merchant account allows online merchants to process credit card payments from consumers.

Many business owners opt to set up third party merchant accounts because qualifying for them may be simpler than securing a merchant account. Many merchant account providers include credit checks as part of the process of securing a merchant account. In contrast, third party merchant account providers may not always require credit checks for account setup. When credit checks are required, the business owner may be held to less-strict standards than he might face with a regular merchant account.

Customers can determine if a merchant's website is secure if the web address begins with "https."
Customers can determine if a merchant's website is secure if the web address begins with "https."

Third party merchant accounts may be easier to set up as well. When a person signs up for a third party merchant account, he may be given links to places on his website. His customers may then click one of these links to purchase a product or service and go to the third party processor's site to complete his transaction. In some cases, a business owner may use a shopping cart on his site for third party credit card processing. When the customer submits the order, however, the payment information is still sent to the third party merchant account provider for processing.

When a business owner uses a third party merchant account provider, his customers' orders are usually sent securely to the payment processor's final payment page. This means there is less chance for a customer's private information to fall into the wrong hands. The final page the customer goes to when completing his payment typically has the payment processor’s company name on it, however. As such, customers are aware that the business is using a third party merchant account rather than its own merchant account.

There are fees typically associated with a third party merchant account as well. Often, a business owner is charged a fee with every transaction. For example, he may be charged a percentage of the price of the goods or services he’s sold. In some cases, however, he may be charged a flat rate for transactions instead. Sometimes a business owner may also face monthly service fees or charges that cover credit card refund fees. Account fees may vary from provider to provider, however.

Nicole Madison
Nicole Madison

Nicole’s thirst for knowledge inspired her to become a wiseGEEK writer, and she focuses primarily on topics such as homeschooling, parenting, health, science, and business. When not writing or spending time with her four children, Nicole enjoys reading, camping, and going to the beach.

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Discussion Comments

stephenw

This is something I have never read about and I didn't know what a third party merchant account is. Very detailed analysis.

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