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What exactly is a Third Party Processor?

A common question we see asked online is, “What exactly is a Third Party Processor”? Well, a third party processor allows other businesses to share their merchant account. This means the merchants who shares their account doesn’t have to apply with a merchant account provider. They apply directly with the third party processor.

The ramification of this are as follows:

1) You have to follow the rules of the third party processor. Because it is their account and they are responsible for it their rules are tighter then a normal merchant account’s rules. They can shut down your account at any time for any reason. Same goes for holding your funds.

2) Their name appears on your customer’s statements. Because it is their account their name is what will appear.

3) Their rates tend to be higher then a normal merchant account because they have to mark it up to make a profit. But other fees, like monthly fees, may be waived which is a good thing.

4) They tend to accept people that merchant account providers don’t. This includes people with bad credit or high risk products. Merchants who have had their merchant account closed can usually still use a third party processor.

To see how third party processors compare to true merchant accounts check out our article Merchant Account Comparison which compares Paypal, Worldpay, and 2Checkout to a true merchant account and gateway.

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