How to Setup a Merchant Account. A Step-by-Step Guide

Having good customer service can be essential to the growth of a business. A necessary aspect of a customer’s experience with a business is its ease of payment. The majority of the people choose the goods and services of firms that have their preferred payment method. Therefore, having the option to pay through credit cards or other alternatives can be more beneficial to a business than you think. Also, it can be more expensive as there are a series of costs associated with credit card transactions. There are more than two entities involved in a card-based transaction.

A business needs to have a merchant account to accept card-based payments. Merchants can attain a merchant account through a merchant services provider based on a few requirements. MSPs are a necessary part of payment processing. They handle all the aspects related to credit card processing, depositing funds into the merchant account, and then into the merchant’s business account. They also provide businesses with essential tools that they might need for their business to run smoothly.

What is a Merchant Account?

When payments are made through credit cards in a business, the funds are transferred into a mediator account before merchants can deposit them in the merchant’s business account. The bank or MSP that is in-charge of processing the merchant’s payments provides this account. This account is separate from the merchant’s business account. It deposits only the funds transferred through credit cards and other cashless alternatives. The account also consists of an agreement regarding the settlement of debit between the merchant and the MSP.

Businesses that are much smaller in size and are new in the market, such as start-ups, are not readily approved through merchant account providers. The essential requirement for a business to have a merchant account is for it to have been in business for at least six months. If getting an account is necessary despite having a smaller company, choosing a bank to provide it may be the best option. Banks that already host the merchant’s personal or business account see it as a credit extension. Therefore are more likely to approve the merchant account.

However, a bank’s main requirement to allow a business to have a merchant account is for the owner to have a good credit score. A bad credit score is the most significant reason for banks to deny merchant accounts.

Steps to Get a Merchant Account

These are the steps that you need to follow to get an account so that you can accept credit cards online and physically as soon as possible;

Arrange All Your Financial Information

With Accredited Interchange, all the documents that indicate the inflow and outflow of finances in the business are well gathered.
This includes all sorts of financial statements of your business. These statements should be consistent and should be available back to you since you have been in business.

Choose the Credit Card Associations You want to Process

Each credit card association, or card brand in other terms, has its structure of interchange and network fees. Not all credit cards will cost the same for you to process; therefore, you can choose whether or not to accept specific card brands in your business. Keeping a keen eye to cut out any extra costs can save a company much money.

Previous Accounts

Suppose your business has been with any merchant services provider before. In that case, you will have to put together all the records that you might have with the previous processor. You may have a history of transactions, chargebacks, and refunds that might have occurred during processing with the provider earlier. It might be necessary to approve an account with a new provider.

Choosing an MSP

This can be one of the trickiest parts. Each payment processor may have a unique way of billing. Some of them are more transparent, and some of them offer a flat rate per transaction, while others can be more secretive and have a markup for each transaction. The best way to know which processor is best for you to understand your needs and which MSP can meet them best.

Submission of Application

After reading the application requirements and attaching the required documents, the merchant must apply to the payment processor for approval.

Fees Associated with a Merchant Account

The cost of payment processing depends a lot on your choice of payment processor. Each payment processor may have a completely different fashion of billing their clients. A few notifiers that a merchant can look out for to make sure they don’t fall prey to unnecessary fees.

When you choose to set up with the processor or submit an application, a high fee is a sign to look out for. This can potentially mean that there will be many hidden or unneeded fees along the way with that specific payment processor. It is imperative to know about all the costs that the processor will be charging you. Some processors cleverly lump their fees up with the interchange fees for the transaction, while some charge for them separately. However, the costs that a processor can charge and a loose estimate is given below;

  • PCI Compliance Fee: For a business to stay safe from fraud or security breaches, a merchant must maintain PCI compliance. Payment processors help maintain PCI compliance and charge $100 on average per year.
  • Recurring Monthly Fee: Your payment processor may ask for this as compensation for their services monthly. This averages at $20 per month.
  • Software Fee: Processors may provide tools and software for businesses to run efficiently. This depends solely on the provider, so there is no estimate.
  • Statement Fee: For the printing and mailing of the transaction invoice, a processor may charge this fee.
  • Batch Fee: Processors charge this fee on processing a batch of transactions. This can cost around $0.20 per batch.
  • Monthly Minimum Penalty Fee: If a business fails to reach the minimum monthly sales, the processor charges a fee to compensate for lack of business. This can cost your company $25 on average.
  • Payment Gateway Fee: A gateway is required for online payments; for providing that, processors charge from $0.05 to $0.10 per transaction.

Leave a Reply