How to Set Up a Merchant Account
Decide how you want to accept credit card payments., Search for a merchant account., Compare fees., Evaluate the merchant account providers., Check if the merchant account comes with a payment gateway., Watch out for scams., Gather your financial...
Step-by-Step Guide
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Step 1: Decide how you want to accept credit card payments.
Before you can get a merchant account, you need to decide exactly how your business will accept credit cards.
Consider the following:
You’ll accept credit cards via your website.
You’ll accept credit card payments over the phone or by mail.
You want to swipe credit cards for customers who visit your business. -
Step 2: Search for a merchant account.
The easiest way to get an account is to stop into your bank and ask for one.
If you’re a solid customer, they should explain your options.
Don’t immediately sign up with your bank but research other providers.
You can get a merchant account through another bank or through an independent sales organization (ISO) or a member service provider (MSP).They are middlemen who work on behalf of banks to sign up customers.
You can find ISOs and MSPs in your phone book or online., Merchant accounts charge many different fees, so you need to perform thorough research before selecting a provider.
Consider the following fees:
Transaction fees.
Generally, there are two fees: a flat fee assessed for each credit card payment and a fee that is a percentage of each amount of the transaction.
Fees might vary depending on the type of card used (e.g., a rewards card) and the number of transactions in a month.
Monthly minimum fees.
If you don’t have the minimum number of transactions, you might have to pay a fee.
Statement fees.
You’ll be charged to receive your statement.
Early cancellation fees.
In the U.S., the average merchant account agreement lasts three or five years.
In Canada, it’s five years.If you want to get out early, you may have to pay a fee.
Other fees, including annual fees, setup fees, and chargeback fees. , You should consider other factors in addition to fees.
For example, consider the following:
Customer support.
You’ll want live support in case any problems arise.
Experience.
Look whether the merchant account provider works with other businesses like yours.
If they do, then they probably have experience with your needs.
Control.
Can you customize payment forms, invoices, and client communications using the software? Comprehensiveness.
Ideally, the software will include email invoicing, recurring billing, and other features.
For example, if you want to swipe cards, you’ll need a credit card reader. , You won’t be able to accept credit card payments unless you also have a payment gateway.
The gateway receives requests and then connects with MasterCard or Visa to see if the customer has sufficient funds.
If they do, then the transaction goes through and the funds are transferred from the cardholder to the merchant account.Many merchant account providers also include a payment gateway—but not all do.
You should check whether you can get an all-in-one solution. , Some merchant account providers employ shady sales techniques.
For example, they may promise to approve any type of business.Or they offer incredibly low processing fees.
You should have your antennae up if you hear anything that sounds too good to be true. , To get approved for an account, you want to show that your business is financially stable.
Accordingly, you should pull together financial statements for your business.Don’t worry if you are a new business.
Believe it or not, you might benefit if you have a low sales volume.
The fewer sales, the less money that will be stored in the merchant account, so the bank assumes less risk. , You might need to provide six months of processing statements as part of your application.
Your processing statements should contain the following information:number and volume of transactions number and volume of refunds number and volume of chargebacks , To apply, you must provide business and personal information to the merchant account provider.
Each application is different, but you generally will be asked for personal and business information, such as the following information:business name and corporate structure business address and contact information your name and contact information total annual sales average transaction banking information , The bank will want to know whether you are a good credit risk.
Accordingly, they will pull your credit history and review it.
You should get a copy of your credit report ahead of time to check for errors.
Remember to get a copy of your personal credit report and your business’ credit report.
If you see errors, dispute them with the credit reporting bureau. , Some merchant account providers will communicate mostly over the phone.
If they see something iffy in your application, they will reach out and call you.
However, sometimes you need to include a cover letter with your application to address weaknesses.Write it like a standard business letter, maintaining a professional tone.
You can increase your business’ credibility by talking about your management team’s experience.
This is important if you don’t have impressive financial statements.
If you are in a high-risk industry, explain how you can minimize risks by, for example, putting up a security reserve.
If you have high trading volumes, play up your solid processing history.
Explain bad credit.
Identify why you got into financial trouble and explain how your situation has improved.
For example, your credit might have tanked two years ago as you struggled with unpaid medical debt.
You can explain that you are better now. , You should receive a Terms and Conditions sheet, which you should review closely.
This sheet contains information about how fees will be calculated, among other things.
Read the fine print in the T&C and the contract.
If you need help understanding the terms, contact your business lawyer for help.
Always read the fine print.
The salesperson might have told you one thing, but the contract says another.Realize that you’ll probably have to sign a personal guarantee.
This means that you, as the business owner, will be personally responsible on the contract.If your business can’t pay the fees, then you will have to out of your own pocket or else get sued.
Only sign the agreement once you agree with everything in it. , If you want to process payments online, you’ll need to install the software so that it is compatible with your website.
Work closely with customer support in case you run into problems. -
Step 3: Compare fees.
-
Step 4: Evaluate the merchant account providers.
-
Step 5: Check if the merchant account comes with a payment gateway.
-
Step 6: Watch out for scams.
-
Step 7: Gather your financial statements.
-
Step 8: Create your processing history.
-
Step 9: Complete an application.
-
Step 10: Have your credit score pulled.
-
Step 11: Address concerns in a cover letter.
-
Step 12: Review the terms.
-
Step 13: Install the software.
Detailed Guide
Before you can get a merchant account, you need to decide exactly how your business will accept credit cards.
Consider the following:
You’ll accept credit cards via your website.
You’ll accept credit card payments over the phone or by mail.
You want to swipe credit cards for customers who visit your business.
The easiest way to get an account is to stop into your bank and ask for one.
If you’re a solid customer, they should explain your options.
Don’t immediately sign up with your bank but research other providers.
You can get a merchant account through another bank or through an independent sales organization (ISO) or a member service provider (MSP).They are middlemen who work on behalf of banks to sign up customers.
You can find ISOs and MSPs in your phone book or online., Merchant accounts charge many different fees, so you need to perform thorough research before selecting a provider.
Consider the following fees:
Transaction fees.
Generally, there are two fees: a flat fee assessed for each credit card payment and a fee that is a percentage of each amount of the transaction.
Fees might vary depending on the type of card used (e.g., a rewards card) and the number of transactions in a month.
Monthly minimum fees.
If you don’t have the minimum number of transactions, you might have to pay a fee.
Statement fees.
You’ll be charged to receive your statement.
Early cancellation fees.
In the U.S., the average merchant account agreement lasts three or five years.
In Canada, it’s five years.If you want to get out early, you may have to pay a fee.
Other fees, including annual fees, setup fees, and chargeback fees. , You should consider other factors in addition to fees.
For example, consider the following:
Customer support.
You’ll want live support in case any problems arise.
Experience.
Look whether the merchant account provider works with other businesses like yours.
If they do, then they probably have experience with your needs.
Control.
Can you customize payment forms, invoices, and client communications using the software? Comprehensiveness.
Ideally, the software will include email invoicing, recurring billing, and other features.
For example, if you want to swipe cards, you’ll need a credit card reader. , You won’t be able to accept credit card payments unless you also have a payment gateway.
The gateway receives requests and then connects with MasterCard or Visa to see if the customer has sufficient funds.
If they do, then the transaction goes through and the funds are transferred from the cardholder to the merchant account.Many merchant account providers also include a payment gateway—but not all do.
You should check whether you can get an all-in-one solution. , Some merchant account providers employ shady sales techniques.
For example, they may promise to approve any type of business.Or they offer incredibly low processing fees.
You should have your antennae up if you hear anything that sounds too good to be true. , To get approved for an account, you want to show that your business is financially stable.
Accordingly, you should pull together financial statements for your business.Don’t worry if you are a new business.
Believe it or not, you might benefit if you have a low sales volume.
The fewer sales, the less money that will be stored in the merchant account, so the bank assumes less risk. , You might need to provide six months of processing statements as part of your application.
Your processing statements should contain the following information:number and volume of transactions number and volume of refunds number and volume of chargebacks , To apply, you must provide business and personal information to the merchant account provider.
Each application is different, but you generally will be asked for personal and business information, such as the following information:business name and corporate structure business address and contact information your name and contact information total annual sales average transaction banking information , The bank will want to know whether you are a good credit risk.
Accordingly, they will pull your credit history and review it.
You should get a copy of your credit report ahead of time to check for errors.
Remember to get a copy of your personal credit report and your business’ credit report.
If you see errors, dispute them with the credit reporting bureau. , Some merchant account providers will communicate mostly over the phone.
If they see something iffy in your application, they will reach out and call you.
However, sometimes you need to include a cover letter with your application to address weaknesses.Write it like a standard business letter, maintaining a professional tone.
You can increase your business’ credibility by talking about your management team’s experience.
This is important if you don’t have impressive financial statements.
If you are in a high-risk industry, explain how you can minimize risks by, for example, putting up a security reserve.
If you have high trading volumes, play up your solid processing history.
Explain bad credit.
Identify why you got into financial trouble and explain how your situation has improved.
For example, your credit might have tanked two years ago as you struggled with unpaid medical debt.
You can explain that you are better now. , You should receive a Terms and Conditions sheet, which you should review closely.
This sheet contains information about how fees will be calculated, among other things.
Read the fine print in the T&C and the contract.
If you need help understanding the terms, contact your business lawyer for help.
Always read the fine print.
The salesperson might have told you one thing, but the contract says another.Realize that you’ll probably have to sign a personal guarantee.
This means that you, as the business owner, will be personally responsible on the contract.If your business can’t pay the fees, then you will have to out of your own pocket or else get sued.
Only sign the agreement once you agree with everything in it. , If you want to process payments online, you’ll need to install the software so that it is compatible with your website.
Work closely with customer support in case you run into problems.
About the Author
Brittany Vasquez
Creates helpful guides on home improvement to inspire and educate readers.
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