For a small business looking to expand its bottom line—by streamlining the payment-taking process— opening a merchant account is an excellent way to go.
This type of account is mainly built to allow retailers to process credit card transactions and start collecting plastic payments in their businesses.
But the process of applying such an account can be a baffling experience, especially if you’ve never been there before.
To help you apply successfully, this article will discuss the six things you must ponder over before embarking on the application process.
- You must be underwritten—and it’s not that complicated
Your would-be payment processor and acquiring bank take a risk when they agree to host your business’s merchant account. Risks manifest in the form of reverse charges, also known as chargebacks—which occur when customers request a refund whatever reason— and could leave a bank accountable for the losses.
Banks tend to avoid businesses with high levels of reverse charges and those with a questionable legal status. Partnering with a helpful account provider can increase your chances of qualifying.
- You must have a business banking account:
Remember, your merchant account only holds the payments you’ve collected for a while. You will need a business banking account where these funds will be transferred and stored.
Visit your nearest bank to create a business bank accounts in a few steps. Carry your business permit and Employer Identification Number (or your SSN if you’re a sole entrepreneur).
Visit IRS.com to get an employer identification number.
- An official business permit is a must-have
Underwriters care about the authenticity of the businesses they onboard. They will almost certainly ask you to submit a copy of your business permit or license—something to prove you’re legit.
Documents like fictitious business name statements, instruments of association, etc., can count as permits. Consult with your state authorities to have your business registered if you operate without a license because most underwriters consider it a must-have.
- Start by applying—online application is easier and hassle-free
Many merchant account providers allow retailers to apply for merchant accounts online in a few steps. After all, underwriting can be done remotely— as long as you attach and send all the necessary credentials.
Here are some of the credentials you’ll need;
- Bank account,
- Tax ID (Employer Identification Number)
- Documentation to prove processing volumes or an estimate for starting businesses
- Contact info vary
Credentials may vary from one account provider to the next.
- Different Payment Models may need different merchant accounts
You’ll need separate accounts for your credit card and Automated Clearing House (ACH) transactions. Make sure to conduct further research if you are looking to take ACH payments.
- Processing charges may fluctuate
Applicable fees may vary from one account provider to the next. The payment model may also affect processing fees. Often, credit card processing fees include a flat charge, plus an extra percentage fee.
To wrap up
That’s almost everything you need to know about applying for a merchant account. Always seek to learn more about your provider before you embark on the application process.
Author Bio: Payment industry guru Taylor Cole is a passionate payments expert who understands the complex world of merchant accounts. He also writes non-fiction, on subjects ranging from personal finance to stocks, and scrutinizes retail merchant services reviews to understand the payments ecosystem. He enjoys eating pie in his backyard porch, as should all right-thinking people.