How to Set Up a Merchant Account

A merchant account enables your business to accept debit and credit card payments.  In order to obtain a merchant account, you will need to enter into an agreement with a member bank that has a processing relationship with Visa and Mastercard.  You may also enter into an agreement with an authorized agent of the member bank, such as an independent sales organization or member service provider (ISO/MSP.)  The agreement means that your business agrees to abide by the operating regulations established by the card credit brands.

Before you start the actual set up of a merchant account, it’s important to think about how you want credit card payments to work for your business.  Some key questions to think through include:

• What types of credit card brands do you want to accept? Visa and Mastercard are standard, but is it important for your business to also accept other card brands, such as American Express?  You’ll want to be prepared with a list of credit card brands you want to accept.
• How do you want to accept payments?  Do you want your customers to make payments to you on your website?  Do you want to be able to process payments on your mobile phone?  Do you want to use a virtual terminal, or is it easier for your business to use an API to integrate into your existing systems to run payments?  Do you have recurring billing needs?  You’ll want to be prepared with the primary way you’ll accept payment, along with all the secondary methods.
• How much sales volume do you anticipate will be through credit cards?  Will you still accept other payment methods, or will you be switching to solely accepting credit cards?  It’s important to have some idea about volumes before you begin discussions with a merchant account provider.

Now that you have an idea of how you want the merchant account to work for your business, it’s time to start to compare merchant account providers.  Some points you’ll want to consider when selecting a merchant account include:

• Merchant Account Transaction Fees:  Most merchant account providers will charge you two types of fees for credit cards transactions.  The first, per-item fee is a flat rate you will get charged for each credit card payment that is processed.  The other is a percentage fee based on the total amount of each transaction.  For the percentage fee, many merchant account providers used a tiered pricing system based on how “qualified” a transaction is for a particular rate.  Most merchant account providers will classify these percentage fees into three tiers of rates, with variables including factors such as the way you accept the payment (vs. the primary way  your merchant account is set up to accept payment), if the card is a rewards card, or if the card is present or not.  Some merchant account providers also have different percentage fees based on the volume that you process.  It’s important to gather all the details on these rates and do some rough calculations with ~50% of your transactions falling into the higher tiers to get a clear picture of what you will likely be paying in fees.
• Other Merchant Account Fees:  There can be lots of other fees associated with a merchant account beyond the transactional fees.  Other fees to ask about include monthly minimum fees, setup fees, cancellation fees, statement fees, customer service fees, chargeback fees, batch fees and annual fees.  It’s important to understand all of the fine print pertaining to these fees up front so there are no surprise costs along the way.
• Evaluating Merchant Account Providers Beyond the Fees:  Not all merchant accounts are created equal, so getting a holistic view up front will be critical to your satisfaction and long-term success with your merchant account provider.  It’s important to consider the following factors:
  • Does the merchant account provider provide you with all the software and payment acceptance options you need, or will you have to supplement with other providers and incur additional fees?  For example, is a virtual terminal, invoicing, recurring billing, website payments and mobile payments all included in an integrated solution with your merchant account provider, or do you have to set these up separately?  The more providers you need to go through, the more costly and complicated your experience will be.
  • How much control over your customer’s payment experience will you have?  Many business owners don’t have the time or expertise to set up customized, online solutions, so finding something that is automated and hosted by your solution provider is critical.  However, in order to provide a good experience to your customers, you’ll want to make sure you can easily customize any invoices, payment forms and payment communications.
  • Is the complete solution tailored to your type of business and easy for you and any other employees to use?  Does the merchant account provider frequently work with your business industry and size?  Finding a provider that is dedicated to your business type means that future developments will continue to align with your needs.
  • Can your customer’s payment account data be securely stored in a manner where you will have minimal PCI compliance issues?  No business needs the headache of an in-depth PCI compliance review, but yet you want to be able to provide your customers with the best possible payments experience.  It’s important to find a solution that helps you meet the best of both those worlds.
  • How is the customer support?  Any sized should be able to demand account management and live support to help ensure success.
  • Is the merchant account provider willing to provide you with references? Talking to other businesses about their experiences with the merchant account provider can be very insightful during your selection process.

Once you have chosen a provider, here’s what to expect in the merchant account set up process:

Since the member bank is taking on risk by enabling your company to process credit cards, you should expect a pretty comprehensive review process before you can be approved for a merchant account.  The merchant account provider will require you to complete an in-depth application and provide lots of information pertaining to your business model and finances.  If you are a smaller business, you will also be required to provide personal information, undergo a credit check and provide a personal guarantee on the account.  This process can feel cumbersome, so it’s great to have a merchant account provider that will hold your hand through underwriting to ensure the fastest, least onerous approval process.

You’re approved for a merchant account.  Now what?

Once your merchant account is set up, you will be ready to start accepting credit card payments.  If you’ve gone with a great merchant account provider this can be as simple as logging into a software product, entering your customer’s payment information, and clicking the collect payment button to have the transaction processed and funds deposited into your bank account.

If you are a small business looking to set up a merchant account, we are always here to help.  Feel free to reach us at 800-466-0992 or online at PaySimple.com.