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

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

Whether you’re a new business or switching merchant account providers if you’re looking at how to get a merchant account for your business, here’s what you will need to know first. We’ve assembled a quick guide to help you through the decision-making process of applying for a merchant account. Let’s start with a few basics.

What is a merchant account?

A merchant account is a type of account that allows your business to accept credit cards, debit cards, and other forms of electronic payments. Merchant accounts are necessary for many types of business, especially if your business involves e-commerce.

Who provides merchant accounts?

You obtain a merchant account from a [merchant account provider][2]. Merchant account providers include banks and other financial institutions that offer merchant accounts to retailers. A merchant account provider processes both online and in-store transactions that include credit card, debit card, and other e-commerce payment methods such as e-checks. In order to use such services, retailers pay a transaction fee to the merchant account provider for every payment processed.

What’s involved in setting up a merchant account?

Setting up a merchant account can be either easy or difficult depending on the merchant account provider and their process. You’ll be faced with finding the products that your business needs, comparing merchant account providers, learning about additional charges, and the application process. We’ve broken it down into six outlined steps to put your mind at ease.

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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 from the merchant account. In other words, decide how your business will accept credit card and e-commerce payments. Your options are:

  • a virtual terminal (a web application that allows a business to accept credit card transactions through internet connected computers);
  • a Smart Terminal;
  • a Point of Sale (POS) terminal that reads cards at your store;
  • accepting payments on your mobile phone or tablet;
  • accepting payments online;
  • recurring billing options.

You also will want to decide ahead of any discussions with the merchant account provider what brands of credit cards and debit cards your business will accept. You will also want to develop an idea of the volume of your credit card/debit card transactions since some merchant account providers base their fees on sales volume.

After finding the products and solutions that you’ll want for your business it’s now time to go out and find the merchant account provider that can offer both the rate you want and the products you need.

2. Compare other merchant account providers.

One of the most important considerations is how the merchant account provider determines its fees. There are several types of fees. Two primary fee programs are:

  • a flat rate, which is a set percentage and a per transaction fee;
  • Tiered rate, 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, processors will charge an additional percentage or per transaction fee on top of the interchange rate.

You will want to explore the anticipated fees with an eye to how your primary way of accepting payment compares to how the merchant account provider sets up the account to accept payments. 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 pay out at the highest fee tier. It’s best to know up front about high fees than to get unexpected bad news after you sign the contract and receive your first statement.

3. Ask about additional charges.

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

  • cancellation fees;
  • batch fees;
  • annual fees;
  • monthly minimum fees;
  • statement fees.

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

4. Will the merchant account provider meet all the needs of your payment process?

Finding a merchant account provider that can meet all your needs help’s 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. Many merchant account providers like [Tidal Commerce][2] can provide you with all of the tools your business needs at a low cost. Pick a merchant account provider to has most of the tools and integrations you need out of the box.

5. Above all, PCI Compliance.

Find a merchant account provider that takes PCI compliance seriously. You will 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. 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 looking for another service to rely on.

6. The application and underwriting process for your merchant account begins.

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, requires 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.

Happy hunting! We hope our guide to how to get a merchant account helps you on your journey to finding a merchant account provider that will fulfill your business needs for far into the future. We would be happy to help, just drop us a line at our get started form.

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