Do you want to open a merchant account to accept credit cards online but lack the know-how? If YES, here is how to get a merchant account fast for your business.
Irrespective of whether you intend to run an Online business or you want to toe the brick and mortar line, accepting credit cards is a requirement you would have to meet. This is a basic expectation of most shoppers and not doing so pretty much guarantees an unsuccessful business venture.
What is a Merchant Account?
A merchant account is a type of bank account that allows businesses to accept payments by debit or credit cards. In other words, a merchant account is an agreement between a retailer, a merchant bank and payment processor for the settlement of credit card and/or debit card transactions.
When a customer pays for a product or service with a credit card, the funds are first deposited into the merchant account and from there, it is eventually transferred to the business’ bank account. Transfers to the business account are normally done on a daily or weekly basis.
Why Get a Merchant Account for your Small Business?
If you are going to operate an e-commerce business and want to accept credit card payments online, you need at least one internet merchant account (even if you already have a merchant account, in many cases). Offline businesses are not left out too.
Merchant accounts are a key aspect of business operations for most merchants. Merchants have a variety of options when choosing a merchant account service provider with transaction costs being a key component in the decision. Merchant accounts are provided by merchant acquiring banks which partner with merchants to facilitate electronic payments.
If a brick and mortar business chooses not to accept electronic payments and only allows for cash, then they would not necessarily need to establish a merchant account and would rely on just a basic deposit account at any bank; but in recent times, a merchant account is fast becoming a necessity for all.
Online businesses however are required to establish merchant account partnerships as part of their business operations since electronic payments are the only option for customers in making purchases.
How to Get a Merchant Account for an Online or Offline Business
Setting up a merchant account for your small business is a fairly simple process that requires only a little time, research, and planning. Read on to learn the guidelines involved in setting up a merchant account for a small business.
Applying for and getting a merchant account is not an easy process even though the business of issuing merchant accounts is highly competitive. To minimize risk, vendors use a variety of criteria to determine whether to approve a merchant account application or not:
- Type of business – does it have a higher or lower risk of credit card fraud or returns?
- Length of time in business
- Business history – bankruptcies, defaults, etc.
- Whether the applicant has had merchant accounts previously
- Personal credit history of the business owner
Most new business owners are more likely to get a favorable review of their merchant account application from the same bank that holds their business and/or personal account(s).
There are two ways to get a merchant account; both require that you enter into an agreement:
The first option involves entering into an agreement with a member bank that has a processing relationship with Visa and MasterCard; whereas the second option involves going into an agreement with an authorized agent of the member bank, such as an independent sales organization or member service provider (ISO/MSP).
The agreement means that your business agrees to abide by the operating regulations established by the card credit brands. In order to get a merchant account for your online or offline business in the united states of America, you should follow the following steps:
a. Start with a Plan-: Before you start the actual process of setting up your merchant account, take some time to plan how you want credit card payments to work for your small business. Some key questions you should answer during this stage include the following:
- What types of credit card brands will you accept? MasterCard and Visa are standard credit cards that are accepted through any merchant account. But if your target customers are using other types of cards, such as Discover and American Express, it is important that you accept those ones, too. So, list the types of credit cards you want to accept.
- How do you want to accept payments? If you are running an online business, you will no doubt receive payments through you website only. But if you are running a brick-and-mortar business, you need to consider many other options aside a website.
Do you want to be able to process payments on your mobile phone? Do you want to use a virtual terminal? Do you have recurring billing needs? Answering these questions will help you decide on the primary method you will use for accepting payments as well as secondary methods.
- How much sales volume do you expect to get through credit cards? You need to have some idea about volumes before you begin discussions with a merchant account provider. This can be a bit difficult, since you really can’t predict how much sales volume you will get through credit cards. But you can estimate roughly based on what obtains with similar businesses and the preferred buying methods of your target customers.
b. Choose a merchant account provider-: After you have figured out your credit card needs, your next step is to research merchant account options offered by banks in your locality. Most of the time, the simplest option is to go with your local bank, since the process of setting up a merchant account is always easier with a bank that already knows you as a customer.
Now that you have an idea of how you want the merchant account to work for your business, it’s time to compare merchant account providers. Some points you’ll want to consider when selecting a merchant account include merchant Account Transaction Fees. There are two common types of fees for credit cards transactions.
- A flat rate you get charged for each credit card payment that is processed.
- A percentage fee based on the total amount of each transaction. For the percentage fee, many merchant account providers use a tiered pricing system based on how “qualified” a transaction is for a particular rate. They will classify these percentage fees into three tiers of rates, using variables such as:
The way you accept the payment vs. the primary way your merchant account is set up to accept payment. Some providers may have different percentage fees based on the volume that you process.
It’s important to gather all the details on these rates and do some rough calculations with 50% of your transactions falling into the higher tiers to get a clear picture of what you will likely be paying in fees.
However, the transaction costs from your bank might and other conditions for using a merchant account might be stiffer than what obtains with other banks, so it is highly recommended that you check with other banks, too. You must bear in mind, however, that if you set up a merchant account with another bank, you will be required to create a checking account with that bank, where your funds will be channeled.
c. Consider Other Merchant Account Fees. There can be many other fees associated with a merchant account beyond the transactional fees. Other fees to ask about include: Monthly minimum fees, Setup fees, Cancellation fees, Statement fees, Customer service fees, Chargeback fees, Batch fees and Annual fees.
It’s important to understand all of the fine print pertaining to these fees up front so there are no surprise costs along the way.
When carrying out your research, you should endeavor to be thorough, this is because some merchant account providers are better than others based on the situation you are facing. You should ask yourself: Does the merchant account provider offer all of the software and payment acceptance options you need, or will you have to supplement with other providers and incur additional fees?
For example, are virtual terminal processing, email invoicing, recurring billing, website payments and mobile payments all included in one solution, or do you have to set these up separately? The more providers you need to go through, the more costly and complicated your experience will be.
d. How much control over your customer’s payment experience will you have? Many business owners don’t have the time or expertise to set up customized online solutions, so finding something that is automated and hosted by your solution provider is critical. However, in order to provide a good experience to your customers, you’ll want to make sure you can easily customize any invoices, payment forms and payment communications.
Is the complete solution tailored to your type of business and easy for you and any other employees to use? Does the merchant account provider frequently work with your business industry and size? Finding a provider that is dedicated to your business type means that future developments will continue to match your needs.
Can your customer’s payment account data be securely stored in a manner where you will have minimal PCI compliance issues? No business needs the headache of an in-depth PCI compliance review, but yet you want to be able to provide your customers with the best possible payment experience. It’s important to find a solution that helps you have the best of both worlds.
How is the customer support? To help you succeed, it’s important to have access to account management and live support along the way. Is the merchant account provider willing to provide you with references or case studies? Learning about other businesses’ experiences with a merchant account provider can be very insightful during your selection process.
e. Apply for a merchant account-: Your next step after choosing your preferred merchant account provider is to apply for your merchant account. It goes without saying that you will be required to provide all necessary documentation and information about your business and yourself as well as a proof of identification such as a driver’s license, international passport, or other government-issued ID. You will also need to submit a voided check for the checking account into which your funds will be channeled.
During the application process, you will be required to provide a detailed list of the types of business activities you conduct. This will prove to the bank that your business is legal. You will also be required to provide your business’s tax documents and financial statements before your application can be approved.
If you will be accepting credit card payments online, your merchant account provider will request a proof of your website, which must be a business website that has its own domain information. You also need to demonstrate that your website has cleat details about product purchases and deliveries, as well as a secure checkout process.
f. Merchant account set up: Since the member bank is taking on risk by enabling your company to process credit cards, you should expect a pretty comprehensive review process before you can be approved for a merchant account. When you choose a provider, here’s what to expect in the merchant account set-up process:
The merchant account provider will require you to complete an in-depth application and you will need to provide a lot of information pertaining to your Business model and finances. If you are a small business, you will also be required to provide personal information, undergo a credit check and provide a personal guarantee on the account. This process can feel cumbersome, so it’s helpful to work with a provider that will hold your hand through underwriting to ensure the fastest and least confusing approval process.
When you have completed all those steps, you can now start accepting credit card payments. If you are using a great merchant account provider, this can be as simple as logging into a software product, entering your customer’s payment information, and clicking the collect payment button to have the transaction processed and funds deposited into your bank account.
Finally, pay the application fees and other required upfront fees for setting up the account. Once you have done all of that, your bank will send you a notification that your merchant account has been successfully created.