10 Things You Should Know About Opening a Merchant Account

Getting a merchant account is important for the growth of any business as it gives online payment access. No matter what kind of business you are running, the availability of a merchant account can give your business a better window to operate better. In such a scenario, understanding all the aspects of a merchant account can significantly impact your overall business’s operations and customer satisfaction. These are the ten steps you should consider while opening a merchant account. 

1. Underwriting is a requirement when setting up a merchant account.

Payment processors and affiliated banks assume risk when offering merchant accounts to businesses. Each dollar processed by their system is subject to chargebacks, which may result in the bank being accountable for the money.

When banks evaluate the risk of new accounts, they consider chargeback potential and business credibility.

To guarantee a seamless underwriting procedure, it is important to collaborate with a seasoned partner, similar to how you would engage a loan specialist for mortgage assistance. Certain merchant service providers have a specific division that focuses on assisting new merchants in establishing their accounts. 

2. Have a Business Account 

You will still require a business bank account before you can open a merchant account, even if you are a sole proprietorship. At your nearby branch, you can easily set up an account within 15 minutes with just a business license and EIN (or social security number for sole proprietors with no employees). You can submit a request for an EIN from the IRS as well.

The funds you receive and the transaction fees you incur will be directed to your business bank account by default. Sometimes, you have the option to divide credits and debits into different accounts, but you need to make a request for it. Ensuring the account maintains a sufficient balance is crucial to cover processing fees and monthly software fees if needed.

3. A merchant account typically necessitates a business license.

If you are not a sole proprietorship operating in specific counties, it is likely that you already possess some form of business license. This could range from a made-up title declaration to official documents of formation. If you haven’t already, go to your Secretary of State’s website to register for the license, as you will need it for purposes other than opening a merchant account. Underwriters for merchant accounts review and store a copy of your license to verify your business.

4. An application is needed for merchant account underwriting.

An application is necessary for the merchant account underwriting process. The majority of providers utilize a digital version of the application. For instance, it only takes approximately 10 minutes to complete Merchant application, enabling the business owner to sign online without having to print, scan, or fax documents.

They will ask for details about the company and the person authorized to sign on the account. Before you begin, make sure you have your bank account and routing numbers, tax ID (EIN), Ticket size, and processing volumes (or estimates) on hand. Additional data gathered on the form may encompass (but is not restricted to): the commencement date of business, contact details, details of beneficial owners, and details of authorized signers.

5. Various kinds of payment acceptance might necessitate individual merchant accounts.

If you want to process both credit card and ACH payments, you might need to undergo distinct underwriting processes with individual processors. Although the credit cards you provide can be processed by one processor, your ACH or eCheck transactions usually use a different one. If you sign up with a software provider or independent sales organization (“ISO”), there’s typically no need for an additional application.

When filling out your application, you will choose the payment options you wish to receive. If you have assistance in submitting your application, they will put together the submission with a voided check copy and send it to the correct processors. Information about the different parties associated with your account can be found in the Terms and Conditions of your application.

6. You must provide the underwriter with the necessary documents for support.

The more documentation you provide with your application, the larger the transaction amount sought by the underwriter. If your company plans on processing just a few thousand dollars monthly, all you might need to begin is a voided check and marketing materials that show you are actively running your business.

If you wish or must apply for handling greater quantities, be ready to submit additional financial details. Sometimes you might need to submit financial documents extending over a two-year period, including profit and loss statements and balance sheets.

 7. Merchant accounts can be opened in almost one business day. 

Once you finish submitting your merchant account application, your account could be activated within just one working day (or even sooner in some cases).

Underwriters work during regular banking hours, therefore applications sent in the afternoon likely won’t be assessed until the next business day.

8. You can utilize the identical merchant account for both your physical store and online store.

Merchant accounts can be easily transferred from your brick-and-mortar store to your online store, which is advantageous. If the platform is the same at both locations, like a TYSYS platform, you can utilize the identical accounts. In case you already possess a merchant account for your store or office, inquire with the representative about its transferability during the application process.

There are two advantages to this.

• You might not need to undergo another round of underwriting.

• Your processing of electronic payments is centralized.

9. The fees for processing and the time it takes to receive funds can differ.

The processing fees can differ depending on the type of payments being processed and the methods used. Your ACH or eCheck processor may apply a fixed transaction fee up to a specific limit, whereas your credit card processor may impose a fixed fee along with an extra percentage charge. Credit card charges may differ based on the type of card and payment method used (such as card presence or absence). Make sure to review the Terms and Conditions stated in your application so that you can grasp the distinctions.

It is crucial to remember the different fees when you have various payment choices. If the customer is willing to provide their bank account information for ACH payments, it is wise to use this method for large transactions. The reason for this is that you will only pay a fixed transaction fee, instead of a fixed fee combined with a percentage of the total amount.

The timing of funding also relies on the method of payment. Funding through ACH transactions typically requires 3-5 business days, whereas credit card payments can be deposited into your account within 48 hours of the transaction.

10. You should pay attention to PCI Compliance.

Before 2008, having PCI DSS Compliance was seen as the optimum standard for businesses that had merchant accounts. Today, it is necessary whether individuals are aware of it or not. What exactly is PCI DSS Compliance? The PCI Data Security Standard (DDS) is a collection of guidelines created by credit card companies to guarantee merchants securely handle their customers’ payments. Although PCI Compliance is not mandatory before opening a merchant account, it will be necessary shortly after, so it is wise to begin considering it now.

During the underwriting process for your merchant account, carefully assess your business environment and ensure the security of your processes. Taking basic measures such as shredding papers with credit card details, adding virus protection and anti-phishing programs to every computer, and enforcing strict password and user ID guidelines can greatly enhance security against potential breaches.

Conclusion

Creating a merchant account goes beyond enabling card transactions; it improves how your business functions and serves customers. Understanding all aspects of a merchant account, including its purpose, types, fees, and security measures, will help you make informed decisions for the future success of your business.

Spending time choosing the correct merchant account provider will result in better cash flow, more sales chances, and higher customer contentment. With the proper configuration established, you will have the necessary tools to successfully manoeuvre through the constantly changing realm of payment processing.