I've been reading up on merchant accounts and have got quite confused. I understand that a merchant account allows you to accept payments via credit card. What I don't understand is why some people use merchant accounts from banks? or virtual merchant accounts like PayPal and Plimus? If I use virtual merchant accounts such as PayPal and Plimus do you have to worry about getting a gateway? If I use a merchant account from a bank will they also provide a gateway? Lastly, what online merchants would you suggest for a website that takes orders but all of the products are dropshipped? Thanks in advanced for the help! I appreciate it.
If you use a e-wallet (you called it virtual merchant account) you don't need to worry about a payment gateway since the e-wallet provider such as paypal, plimus etc. will provide an interface for you. If you decide to go for a merchant account with a bank you will need to connect / integrate your website with a payment gateway in order to get the payment transactions through to the bank, however, most banks can refer you to the payment gateway they work with, often you will find the payment gateway first which then will refer you to the bank! For dropshipping you will need to look into a merchant account provider ( MAP) which is able to place your business, most won't accept it without a good business plan.
You basically have 3 parts to the system. The Merchant account allows you to accept credit cards. It is more or less an agreement with a processor that allows you to accept cards. A Payment gateway simply enables you to connect your website to the merchant account. This way the transactions you accept are automatically routed through your merchant account, and then the funds are deposited into your bank account. You must have a payment gateway to integrate with your merchant account. The other type of entity, is a 3rd party processor. This is what Paypal, 2checkout, and other are. They own the merchant account, and they process transactions for you. Usually they have their own API or simple integration, so you would not need a Payment gateway if you use one of these. Merchant accounts can be obtained through a bank, or through an MSP / ISO. Most banks actually refer their accounts to an ISO, so just because your bank offers services, doesn't mean they actually handle the account. Which is best to use is a matter of preference. You can find an ample amount of Paypal horror stories out there. On the other hand, it's often a good idea to start out with Paypal, and then switch to a traditional merchant account once business gets going. Personally, I recommend accepting credit cards through a merchant account, and then offering Paypal, and possibly Google Checkout as alternative methods. There's a number of people that absolutely will not use Paypal, and there's a number of people that only want to use it.