How to Get a Merchant Account: A Step-by-Step Guide

There are two main times when you need to get a merchant account: when you are switching merchant services providers to get better rates, service, and tech, or when you’re just starting to build the infrastructure of your business.

Your choice of merchant services will define a critical part of your business — the actual way your business accepts and transfers money, and your merchant account is the key that lets you start accepting transactions.

So how do you get one? What’s that process like?

Today, we’re going to walk you through that process step-by-step, including all the best practices and ways to think through setting up a merchant account.

But before we do that, let’s talk a bit about what a merchant account is why they’re needed in the first place.

What you need to know before you set up your merchant account

What is a merchant account?

Simply put, a merchant account is a special type of bank account that allows your business to accept credit cards, debit cards, and any other form of electronic payment. You have to have one to accept cards, and this is an essential component of any modern business.

Who provides merchant accounts?

Businesses get merchant accounts from merchant account providers.

So who counts as a provider, then?

Technically? Just banks since they’re the ones who ultimately have control over these accounts, but you can get them from a few sources. Each of these sources are viable options for merchant accounts and make their money by adding fees to transactions.

1. Directly from the providing bank itself. These banks typically partner with a merchant services provider or ISO (independent sales organization).
2. Merchant services provider. Merchant services providers like us (Tidal Commerce) partner with a bank to provide merchant accounts to merchants like you. We specialize in providing the best tech, the best service, the best prices, and the best integrations into one simple service.

Discover why getting a merchant account with Tidal Commerce is the best decision you can make for your business

1. Independent sales organizations. ISOs and MSPs are similar and can sometimes be one and the same, but they typically work with a network of other independent agents and organizations to sell their merchant services software.
2. Independent agents. These agents work to add merchants to a specific merchant services partner in order to receive a cut of the residuals from future transactions. Like any salesman or sales-based company, these people can be honest and provide legitimate services or sharks looking for gullible merchants.

The choice you make will depend on your business, although we recommend working directly with a merchant services provider or independent sales organization since you know their business depends on your success, you have the ability to vet them more thoroughly beforehand, and they usually offer more comprehensive tech and support options than banks.

What’s involved in setting up a credit card processing merchant account?

Setting up a merchant account can be either easy or difficult depending on the merchant account provider and their process.

At the minimum, you’ll need to understand what your business needs are and why, compare company reputations, services, and prices, collect the information required for a merchant account, and complete the application process.

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Now that you know what a merchant account is, let’s cover how to set up a merchant account for your business.

How to get a merchant account: step-by-step

Step #1 - Understand what your business needs in a merchant account.

Before you talk to any merchant account provider, it is important that you understand what your business needs are. In other words, you need to decide how your business will accept credit card and eCommerce payments. Make sure you think in the short-term and long-term. Merchant services contracts can sometimes be lengthy, and the process to move away from a provider can be laborious. Your aim should be to find a provider that you can trust to equip you with what you need both now and for when your business grows.

Here is some of what you need to be thinking about:

• Number and types of terminals. Do you only want traditional terminals or does your business need mobile readers and mobile POS systems? Think about the payment hardware that your business needs to stay competitive.
• Online gateway. eCommerce is huge these days. If most of your business is online, then you need a modern, tech-focused merchant account provider.
• Invoicing flexibility and payment options. Think about how often and what types of payments you receive from your customers. If you work with recurring subscriptions then you need an account provider that gives you that option.
• Know your average processing volume. Obviously this isn’t possible if you aren’t in business yet, but assuming you are, you need to know what your average processing volume is. That goes for both your total revenue and how that revenue is split between card types. Then, take that amount and draw realistic growth projections. You want to think about how much this provider will cost you now and in the future.
• Features like loyalty programs or custom integrations you may need. Not all account providers are going to be able to give you the system you need. Make sure you identify all features related to payments that you want before signing any contracts. Being armed with specific questions about a merchant account provider’s gift card program or custom POS integrations will save you a lot of headaches.
• Have a basic idea of pricing and a recent statement on hand. Figure out what you have been paying in processing and what you’d like to pay, then try to find a provider who can analyze a statement for you before they make you sign anything.

After finding the products and solutions that you’ll want for your business, you should go out and find merchant account providers that can offer both the rate you want and the products you need.

Step #2 - Compare merchant account providers

One of the most important considerations is how the merchant account provider determines its fees. There are several types of fees.

The three primary fee programs are:

Flat rates, which are a set percentage and a per transaction fee.

Tiered rates where transactions are grouped into different transaction fees for qualified, mid-qualified and unqualified transactions; and

Interchange Plus, which consists of a set percentage and a per transaction fee that varies with each transaction as set by the individual credit card brands. Then processors will charge an additional percentage or per transaction fee on top of the interchange rate.

We’re big fans of interchange plus pricing since it can often cut costs according to your specific business needs. It’s not as easy to understand as flat rates, but you can save lots of money in the long run.

See how merchants save up to 35% with Tidal Commerce

Analyze each offer with cost projections based on your past volume and goal volume in mind. E.g. If the merchant account provider has a tiered system of fees, do some rough math to see how much of your expected sales volume will payout at the highest fee tier.

It’s best to know upfront about high fees than to get unexpected bad news after you sign the contract and receive your first statement.

Step #3 - Closely examine the contract and fees involved

Merchant account providers often impose charges in addition to the transaction fee schedule. A few examples are:

• Cancellation fees. These are fees for ending a contract early.
• Batch fees. These fees are for when you upload/settle your transactions.
• Annual fees. Yearly fees for blanket services.
• Monthly minimum fees. Fees for not transacting a certain amount.
• Statement fees. Fees for receiving statements.

Yes! Some of these fees may seem outrageous, and we agree. If you find an MSP with high annual fees, transaction floors, and statement fees, you should run the other way. Whatever processing rate they’re offering isn’t worth it, believe us.

And watch out for high cancellation fees, some merchant account providers rely on cancellation fees to make most of their profits. Be wary as some merchant account providers will also charge a cancellation fee in addition to the monthly fees they will lose for the length of the contract.

These are borderline criminals who you do not want to be involved with.

See a complete list of what merchant account fees you should watch out for

Step #4 - Make sure you’re working with a provider who has a partnership mindset and can give you all the services you need

Finding a trustworthy merchant account provider that can meet all your needs helps reduce your initial and ongoing costs.

Having to get additional payment solutions like PCI compliance scans or third-party gateways from other providers can increase your expenses substantially, and working with a company who has a suite of tools that all work well together will save you a lot of money.

Pick a merchant account provider who has most of the tools and integrations you need out of the box and demonstrates an honest desire to develop a partnership from the moment of first contact.

Step #5 - Take a close look at how the provider handles PCI Compliance

Find a merchant account provider that takes PCI compliance seriously.

You want to make sure that the merchant account provider you select will help you store your customer payment data in a safe manner that satisfies Payment Card Industry (PCI) compliance so you don’t have to conduct a full PCI compliance review and risk business-crippling breaches and/or fines.

You should also look out for the PCI compliance features the payment processor offers. Some processors offer PCI compliance scanning tools that help you stay compliant without needing another service to rely on.

Step #6 - Begin the application and underwriting process

Once you’ve made your decision, you’ll fill out an application either online or through a sales member.

After your application is submitted, your application will undergo a deep inquiry into your business model. Underwriters go through finances both business and personal, a credit check and, in some cases, require a personal guarantee.

The application process can be time-consuming, paper-intensive, laborious, and confusing at times. That’s why you want a merchant account provider whose representative gives your application their full personal attention and gives you a lot of TLC throughout the application and underwriting process.

What you will need to finish your merchant account registration:

• Business ID
• Your credit will be pulled
• Business bank account and routing information
• Date your business started
• Misc. contact information
• Ownership/equity divisions
• Typical processing volumes and/or transaction reports

Other things to note…

The length of time it takes to get a merchant account depends on the business

Each business is unique and the timeframe will be changed according to how quickly you can work with the merchant account provider, but you can typically get a merchant account in 2-3 days.

Not all providers work with all businesses.

Many MSPs and acquiring banks (including Tidal Commerce) don’t process for businesses that are located outside the U.S., are committing illegal activity, selling counterfeit or knockoff products, or are otherwise considered “high risk”.

Examples of these businesses include:

Adult content or services

Drugs

Gambling

Multi-level marketing

Virtual or cryptocurrency

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How to start setting up a merchant account right now

We wish you the absolute best in your search for a merchant account, and assuming you’re looking for a merchant services partner with demonstrated expertise and a clear passion for partnership, then you should see if you’re a good fit for us.

We work with smart, driven business owners who want to grow. If that’s you, give us a call.