How to transfer money from a merchant account, using a mobile device

Transferring funds from your merchant account differs from sending money from your regular bank account. Read this article to get to know about the peculiarities of your merchant account.
Internet user on laptopEntrepreneurs need to open merchant accounts to be able to accept credit card payments online. Transferring funds from your merchant account might be a bit trickier than using your day-to-day account. Nevertheless, you can carry out this task on your smartphone. From this article, you’ll get to know how to send money from your merchant account and which smart tips you should keep in mind.

Why You Might Struggle to Transfer Funds from Your Merchant Account

When you send funds from a day-to-day bank account, you can do it very quickly. But if you want to use funds from your merchant account, you might need to wait for up to two weeks. Let’s use an example of an online shop to explain how it works.

The customer places an order in an online shop.

The shopping cart program on the site collects the order information and compiles, encrypts, and transmits it to a credit card processor.

The credit card processor forwards the transaction to the credit card network.

The credit card network routes the transaction to the customer’s issuing bank.

The bank validates the card and the account.

The credit card processor gets a response about whether the requested amount can or can’t be transferred.

The processor resends this response to the shopping cart.

The cart lets the customer and the merchant know whether the transaction has been successful or not.

If the transaction was successful, funds will be deposited into the merchant account of the shop. The fees that the merchant needs to pay for handling all the above-mentioned transactions will be deducted from this sum.

All these processes take less than one minute. But then, you won’t be able to transfer funds from your merchant account to someone else’s account immediately. First, you’ll need to transfer the funds from your merchant account to your business bank account — and this might take up to two weeks.

After the money lands on your business account, you’ll be able to reach it through your bank’s app on your smartphone and do whatever you wish with it. However, that’s not the only possible way out. To understand why some entrepreneurs don’t need to wait for two weeks, let’s compare different types of merchant accounts.

Three Varieties of Merchant Accounts

Traditionally, you would need to contact an acquiring bank to open a merchant account. It can be a provider specializing in merchant services related to card acceptance. After you submit an application, you’ll need to wait for weeks for the approval, and then, you’ll sign a long-term contract with the acquirer. Alternatively, you can ask an independent service provider to negotiate contract terms with the acquirer on your behalf.

You would get either a dedicated or aggregate merchant account. The former will give you total control over your funds. The account provider will deduct a fee for each transaction you conduct — and the rest of the funds will be deposited into your business account.

When opening an aggregate merchant account, you’ll need to provide information about your organization and the kinds of goods and services it offers. The funds that customers pay to you will be pooled with other businesses. You won’t get exclusive control over your account and won’t be able to negotiate the rates when using this account.

That was the traditional approach. Today, you might want to try a more advanced alternative — that is, an online merchant account. It’s an online account through which you can access funds received by payments online or through certain card readers. This approach involves using a conventional merchant account — but you won’t need to enter into a contract with it.

To be able to make and receive transfers and payments, you don’t need to connect your online merchant account to your day-to-day bank account. PayPal’s Business account can serve as a good example. If you open it, clients can pay you online or through the PayPal Here card reader. Then, you can do the following operations with the funds that you receive.

Keep them online

Transfer them to your day-to-day bank account

Make PayPal payments

Use a special debit or credit card attached to the online account

In this case, you won’t need to wait for two weeks and will be able to use your money immediately. Also, it will take you considerably less time to open such an account. You might be able to start accepting payments a couple of days after you submit the application.

Remember About the Fees

Mind that you won’t be able to transfer to another account 100 percent of the funds that you expect to receive on your merchant account. You’ll need to spend some part of this money on fees. Some of them are periodic, others are charged on a percentage or per-item basis. These are the most common types of fees that you might need to pay.

Monthly or annual. You need to pay it to maintain your merchant account.

Authorization of the transaction. This fee will be charged each time you send a transaction to the bank that issued that card — and the bank will need to authorize it. You’ll need to pay this fee even if the transaction fails to pass the authorization.

Commission. This category involves cross-border fees and interchange fees.

Chargeback. You’ll need to pay it in case of fraud, sales error, or complaint generated by the cardholder.

Swift. You pay this fee for transferring money from your merchant account to some other desirable company or a private bank account.

Most likely, you’ll need to pay a fee for opening a merchant account. But we don’t mention it in this list because you’ll use some other source of the fund for it and not the merchant account itself.

Final Thoughts

If you want to transfer money from a merchant account on your phone, you should send these funds to your business account first. To accelerate and facilitate this process, you might want to open an online merchant account.