Follow the Wikipedia definition, a merchant account allows a business to accept credit cards, debit cards, gift cards and other forms of payment cards. This is also widely known as payment processing or credit card processing.
Merchants, or business owners who receive credit card payment for their goods or services, must apply for a merchant account typically through a merchant account provider. The merchant account will typically be established based on several factors. Merchants who own businesses with poor or no credit may find it difficult to establish a merchant account through traditional routes.
Merchant accounts are not free - a variety of charges are involved. Some fees are charged on a monthly basis but most are charged on a per-item or percentage basis. All of the monthly fees are at the discretion of the merchant account provider but the majority of the per-item and percentage fees are passed through the merchant account provider to the issuing bank according to a schedule of rates called Interchange fees, which are set by Visa and Mastercard.
Most Credit card terminals in current use consist of a modem, keypad, printer, magnetic stripe reader, power supply and memory card.
An alternative is to use a Payment Gateway
What is a Gateway?
In short, a gateway connects your ecommerce Website to your merchant account. The gateway facilitates online payments by connecting your secure order form with your specific merchant account at a processing bank.
The gateway takes the submitted form data and presents it to the processing bank. When it receives a response from the bank, it presents that return data to the site of origin for appropriate handling.
It is the equivalent of a physical POS (point-of-sale) terminal located in most retail outlets. A merchant account provider is typically a separate company from the payment gateway. Some merchant account providers have their own payment gateways but the majority of companies use 3rd party payment gateways.
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