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What exactly is a merchant account?
A Merchant Account is a bank account in which funds are collected by a bank from credit card purchasers and disbursed to the merchant. Banks consider Merchant Accounts to be a 'loan' and underwrite the issuance of a Merchant Account much like a loan, requiring an application, supporting documentation like tax returns, acceptable products/services and good credit. The bank takes a percentage of each sale as a processing fee. It may also impose a transaction fee for each attempted purchase, even if no sale is completed.
Credit Card Processor
A credit-card processor is an institution separate from and independent of the bank issuing the Merchant Account, or the processor may be a stand-alone institution providing both the Merchant Account and processing services. The processor acts as an intermediary between the purchaser and merchant, receiving the purchase request from the purchaser, verifying funds available in the purchaser's credit-card account, transferring the funds to the merchant's Merchant Account, and confirming the successful transaction to both the purchaser and merchant. 
For its trouble, the processor assesses a transaction fee (~25¢-50¢) for each attempted purchase, again, even if no sale is completed. (In rare instances, certain processors only assess a fee for a successful sale, but in turn may charge as much as $1 per successful sale.) All processor's transaction fees are in addition to the merchant bank fees. In this fee environment, there is fixed monthly fees like statement fees ($10-$30), gateway fees ($10-$25) and minimum processing fees. There are application fees & licensing fees, set-up, start-up and make-it-up fees. The ultimate 'catch' for many many merchants however will be that they will either be declined a Merchant Account or they will be offered a higher fee because the issuer has classified certain businesses as 'high risk'.
Benefits of Merchant Accounts
• Cheaper than Online Pay Services
• Convenient
• High Dollar Limit
• High Transaction Limit
• Direct Merchant Support
• Disadvantages of Merchant Accounts
• Start-Up Costs
• Misrepresentation and Deceit
• Subject to Cancellation
• Requires Good Credit Rating
• Some Product Rejections (like travel)
• Underwriting Hassle for Larger Volume (over $20,000/month)
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