A merchant account is a special type of business bank account that allows your business accept different types of payment, typically debit and credit card payments.
So a merchant account is an agreement between a retailer, a merchant bank and payment processor for the settlement of credit card and/or debit card transactions. Although we’re still quite a way off from becoming a truly cashless society, today almost all American consumers have either a debit card, a credit card, or both, and rely on them to make most of their day-to-day purchases. Card acceptance translates directly into increased sales and prevents the possible loss of a sale from consumers who now usually carry little or no cash and leave their check books at home.
When it comes to merchant accounts for small businesses, there are generally two ways to get a merchant account and both require that you enter into an agreement:
This position walks you through the 5 steps of figuring that out for a new business merchant account, including how to:
To minimize risk, vendors use a variety of criteria to determine whether to approve a merchant account application:
Most new business owners are more likely to get a favourable review of their merchant account application from the same bank that holds their business and/or personal accounts.
Having a higher risk does not mean that an application will be rejected. However, the vendor may initially demand higher transaction or other fees to compensate for risk. If the business becomes well established, the fees can be renegotiated at a later date.
Merchant accounts can have a variety of fees attached to them, not all of which are always clearly outlined in contracts, including:
Additional fees can increase the total fee per credit card transaction to over 3%, so you'll want to shop and compare when looking for a merchant account - be aware that in addition to extra fees, some also come with contracts that are minimum term and cannot be cancelled without penalty.