Are you looking for a way to ramp up your newly started business’s profits? Have you thought of adding to the types of transactions you can complete?
If you are an area business owner and are tired of paper invoices and snail mail to receive payments, this might be just the perfect time for you to set up your merchant account.
Yes, that’s right! Without a merchant account in today’s fast-paced technological world, you surely are missing out on a lot of business.
However, getting applying for a merchant account online might not be as simple as it sounds.
There are a lot of things to consider before getting starting with the process. For instance, why do you need a merchant account? What type of paperwork is involved in getting a merchant account? And finally, what do the underwriters want to see for that? Just in case, if you haven’t thought about that, then, yes, you will have to be underwritten.
To begin, merchant accounts open up a whole new world for business, whether big or small, new or existing, and if you have made up your mind to get one for yourself, it is one of the wisest decisions you could make as a business owner.
Keeping in mind, it’s significant and necessity in today’s digital era, in this blog, we will walk through the entire merchant account opening process step by step.
But first things first, below are 15 things you should know before getting one for yourself.
Whether you have questions about which payment processor to select or what types of payments you can accept, we have got all the information in the world for you. You undoubtedly be more informed and know exactly what to ask the payment processor after this. So let’s begin!
All the payment processors you might be considering, and their partnering banks tend to take on a certain level of risk by offering merchant accounts for a business. There is always a possibility that every dollar transacted through their system could be charged back, leaving the bank responsible for the funds potentially. To simplify this further, here’s an example for you:
Say a business processes a transaction through their merchant account but, unfortunately, cannot make it to deliver the product or service because they cannot afford it or they have closed. Now what will happen in such a situation is that the customer issues a chargeback, which will, in turn, make the bank responsible for issuing a refund as soon as possible. Often before they have recouped the funds from the merchant account.
When assessing the risk affiliated with new merchant accounts, banks often look at the possibility of chargebacks along with the legitimacy of businesses. In order to ensure a smooth underwriting process, the best you can do is to work with an experienced partner who knows everything about the process. Someone from a mortgage or a loan expert would be the right person for that.
Before opening a merchant account, even if you are a sole proprietorship, you will have to set up a business account first. It will hardly take 15 minutes of your time, and you can get this done at your local branch.
The business account you open will act as the default destination for all the funds you transact along with the account where transaction fees will be debited. If you want to have separate credit and debit accounts, you can also request for that.
It is essential to keep a balance in this account that is large enough to cover a monthly software fees and the processing fees.
If you are wondering to accept ACH payments and credit card payments, you might go through separate underwriting processes that include separate processors. However, for your ease, it does not require an extra application for both if you go through a software provider or an independent sales organization (ISO).
You will have to select all the different types of payments to accept on your application form. If there is anyone helping you out with the compilation of the application, they might get this done with a copy of a voided check and then send it to the applicable processor securely. If you need more details on this, you can find them in your application form’s Terms and Conditions. Go through all the terms and conditions thoroughly.
If you already have a business license, great, but if you don’t, hurry up and get one. This can either be a fictitious name statement or some articles of incorporation. You would require a business license for reasons outside of setting up a merchant account.
Merchant account underwriters review and get a copy of your license for validating your standing in the business industry.
The fact that merchant account underwriting requires an application, there are providers that prefer to use an online version of the application. Simply because this way, you will not have to hassle with mail or FAX.
The application will hardly take 10 minutes, allowing the business owner to do the signatures online, eliminating the need for printing, scanning and faxing.
The online application will then request information about the business along with authorized sign on the account. You will need the routing numbers, a bank account, tax ID, and processing volumes before you begin.
Keep in mind that the greater the amount you are intending to transact from your account, the more documentation will the underwriter want to see in your application. And, if you think your business will have greater transactions, you might need to provide a voided check and some marketing material to begin. This will prove that you are actively conducting business and thus, there will be no problems in the future.
For your information, PCI Data Security Standard (DDS) is a set of rules and regulations developed by the credit and debit card companies for ensuring that merchants are processing their customers’ payments with security and safety.
While you might not be requiring PCI Compliance right after opening your account, but you are soon going to require it so it is better to start thinking about it now.
The best part about the merchant account is that it can easily be transferred between your physical storefront and your online operation. If you already happen to have a merchant account for storefront or your office, as the representative if it is transferrable.
There are two benefits for that:
a) First is that you might not have to go through another round of underwriting process.
b) And secondly, your electronic payment processing can be consolidated tis way.
As far as POS terminals are concerned, there can be lots of options for you. The type of terminal you select would depend upon the payment options you are intending to accept, along with where and how these payments are going to be approved.
If you are only accepting payments from a physical location, a countertop model might work best for you. However, if you want to accept payments offsite, such as festivals or farmer markets, a mobile POS system is the way to go. In case of phone payments, you will need to discuss a virtual terminal.
The customer support system should be there to assist you 24/7, which is certainly critical to the success of your business. For instance, if your POS system goes down of the network stops to work duringpeak business time, you will be able to complete the payment. When getting a merchant account, always keep in mind to ask and understand how much support can your processor offer before you sign the processing contract for your business.
One of the most frequently asked questions for merchant accounts is when to start receiving funds in the bank account from the credit card transactions. The answer to this question, however, depends on a variety of factors. It depends on your agreement with the merchant processing services provider, the financial institute you tend to use and how often do you send your authorized transactions for the settlement.
Do not forget to understand this timeline at the time you sign your contract so that you are not caught low on funds.
So, what will happen if you need to terminate your payment-processing contract early? Well, there are contracts that include “early termination” clause, while others do not have this option. You might also be assessed a fee in case you plan to end your agreement early. On the other hand, some processors do not charge any fee for this action. Make sure to check the contract carefully when setting up for a merchant account if you feel you might end up terminating the credit card processing early.
Before you sign in for opening a merchant account, make sure to get to know the provider you are considering. You cannot get an account with just anyone, so not settle for anything less. Do your research about the provider and make sure they are reputable. If you don’t do that then keep in mind that neither is your information secure, nor is your money.
Find out for how long they have been in the business. If anything feels made up or sketchy, then do not risk investing your money. You will always have tons of other options, after all.
If you want to know how much time will it take for you to begin accepting card payments, there is a lot of variation. Chances are, if you happen to run a small business that has a single location and terminal, the process will be a bit quicker. However, if you have a huge business with terminals spread all over the city, then your ramp-up time might also be huge. So, plan accordingly!
Last but not least, the cost of accepting credit cards differs widely. Make sure to pay attention to how and what fees will be assessed when you are about to sign the contract with your processor. You would be responsible for interchange fees assessed by the credit card networks along with the processing fees and other additional fees that depend on the services being offered. Ask as many questions as you can. You cannot set up a merchant account until the processor answers all your queries and questions. Negotiate! You never know you might be able to negotiate for a lower rate.
While the best rates and the most pleasant conditions totally depend on the type of business you run, its size, processing history, and many other details, the above-mentioned points will surely make it a lot easier for you to understand merchant services and the need for merchant accounts in detail.
And, with that, it looks like you now know everything needed to take into consideration for getting a merchant account for yourself.
This is the starting point of your journey, and the answer depends on the location or demographics of your target audience. For instance, if you are looking for online merchant services USA, then American Express would be fine. In the case of other countries where they have their specific credit card brands, you might have to choose accordingly.
As far as the payment model is concerned, you can either go with recurring billing or with one-time payments for your clients. See if your bank offers both of these payments and accept accordingly. Keep in mind that rates bank establish depend on the turnover of your business, so be ready to provide the institution with all the essential documents.
It is better to open a merchant account with a local bank, which is under the same jurisdiction; your business merchant account is registered. You can save up on the rates this way.
If you have a website already, you are all set to proceed, but if you still don’t, get one immediately.
Start to comb through your website and make sure it complies with all the Visa and MasterCard requirements. If you use the services of an online payment service provider, get help from them. If you live in the U.S and still are wondering which online payment service would work best for you, Empire Pay Tech is the perfect place. Not only will they help you with the process, but also are the rates quite affordable.
When done, start compiling all your important documents.
Note: Keep in mind that the list of documents might vary from bank to bank.
It is now time to fill out the online application form for your merchant account opening. The bank will then look into your form and documents and make a final decision in some time. Again the timing will also differ from bank to bank.
If accepted, you will be asked to pay the setup fee, along with the monthly chargeback, decline, and refund fees.
As soon as the banks set up your account, you are good to go with credit card payments.
If you have queries regarding the process or eCommerce payment processing solutions in general, please leave your comments down in the comments section. Also, let us know if the blog was helpful.