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What are the Different Types of Merchant Transaction?

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  • Written By: Felicia Dye
  • Edited By: Heather Bailey
  • Last Modified Date: 02 December 2016
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    Conjecture Corporation
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Merchants often conduct a wide range of transactions. Some of these are similar to personal transactions, but many are unique. An example of such a merchant transaction is gift card processing. Other transactions include cash sales, refunds, and holds.

If all of the merchants in the world were considered, it is likely that cash sales would be the most common merchant transaction. It is also one of the least innovative. Cash sales tend to simply involve a consumer presenting cash to a merchant for some product or service.

Many people purchase goods and services with credit cards. This involves a merchant transaction known as credit card processing. Such a transaction occurs when a person with the authority to access a given account decides to make a purchase without cash. That individual authorizes the merchant to request the funds from a third party. In such instances, the merchant is paid by the third party, not the consumer.

Sometimes consumers need products or services but the amount of those items are not initially known. To reduce the risk of non-payment, a merchant may hold a certain amount of money available on a credit card or bank card. When a merchant does this, no money is transferred between any parties. However, whatever amount is put on hold becomes available to the merchant and unavailable to the account holder until the hold is released.

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Gift card processing is another merchant transaction that can eliminate the need for cash. This system allows a person to store value on a card that can be used at a later date to redeem goods and services. In most cases, this is done when one person wants to give another person a gift without choosing the object. The person who receives a gift card can take it to a merchant that accepts it and have the value on the card deducted from the cost of her purchase.

For numerous reasons, a consumer may change her mind about a purchase. When this is permissible, it often involves a merchant transaction known as a refund. Refunds can be issued in a number of ways. Some merchants will only issue credit for the amount previously spent, thereby ensuring that the spent monies remain in their accounts. Others will return the full amount in whatever form it was paid to them.

A rebate is another type of merchant transaction. Rebates involve consumers paying for a merchant’s goods or services. Once that payment has been verified, the merchant will return a portion of the money to the consumer. This is often used by merchants to encourage people to buy their goods.

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