The Complete Guide To Setting Up A Merchant Account
Finding a trustworthy merchant account for credit card processing is one of the most important things you can do for your business. And that’s why there is a lot to consider.
A good merchant account provider has transparent fees and flexible terms, plus a variety of card readers or register options to choose from. Add to that good customer service that you can reach during the day. For eCommerce businesses, 24/7 customer support through chat or phone may be important to look for, too.
Beyond payment processing, your merchant account provider may also offer additional add-on value with multichannel selling tools to help you boost sales. And, of course, a merchant account provides payment security through encryption or tokenization to ensure you and your customers are protected.
When a merchant account provider offers tools like these, benefits more than outweigh the inherent costs associated with processing credit cards. We’ll show you what to look for and how to set up a merchant account for credit card payments so that you can find the right fit for your small business.
Table of Contents
What Is A Merchant Account?
A merchant account provider, whether that’s a bank or company that specializes in merchant services, offers your business the tools to accept credit cards and then transfers the funds to you.
The above is a very simplified definition that sums up how a merchant account helps you, but there is quite a bit more going on before the money gets to you.
Behind the scenes, the merchant account provider requests authorization and gets approval from the issuing bank, and this all happens in just seconds. To appreciate the scope of credit card processing plus the alternative to a traditional merchant account, check out What Is A Merchant Account?
How Long Does Setting Up A Merchant Account Take?
How long it takes to apply and get approved for setting up a merchant account can vary, depending on several factors. If the company you’re working with has an efficient application process and you have all of the documentation needed, it could take you less than half an hour to apply for an account.
The approval and underwriting process with a traditional merchant account typically takes a few business days, however. If your business is high-risk, it could take a little longer before your merchant account setup is complete.
A payment service provider is a third-party processor that keeps merchants under one aggregate sub-account. You’ll find fewer hoops to jump through in the approval process, but there is typically more scrutiny after the fact as you build credibility. For a business processing less than $5K a month or without business history, sometimes this is the only option to start processing, however. Find out the pros and cons to watch out for in our post, The Secret To Accepting Credit Cards Without A Merchant Account? Finding A Great Third-Party Processor.
How Much Does Setting Up A Merchant Account Cost?
While it’s true that many providers charge you a one-time merchant account setup or application fee to create a merchant account, that’s not always the case. We’ve reviewed many providers here at Merchant Maverick, and we consider high application fees to indicate potentially more hidden or add-on fees down the line. That’s why, more often than not, you won’t find companies that charge application fees on our top-rated list.
Make sure to ask about any fees and look at your contract before setting up a merchant account. Many providers wrap fees into their processing charges, but some charge separately for them. We’ve included a very loose ball-park guestimate of what charges you could see, but these vary.
- PCI compliance security fees (typically up to $100 per year)
- Monthly account fees (flat fee of approx. $20/month)
- Batch fees ($0.20 per batch)
- Software fees (varies)
- Add-on reporting fees (varies)
- Payment gateway or related online eCommerce fees ($0.05 to $0.10 per transaction)
- Fee for not reaching minimum transactions for the month ($25)
Again, keep in mind that companies are all over the map when it comes to their fee structure. You have to do your homework, and there’s no shortcut.
What Do You Need To Set Up A Merchant Account?
How to set up a merchant account for your small business varies depending on your structure and how long you’ve been in business. Essentially, you’ll need to show you have a legitimate business with the following:
- Employer Identification Number (EIN)
- Amount of time you’ve been in business
- Credit history for the business owner(s)
- Proof of business bank account
- Bank statements (for existing businesses)
- Projected monthly processing volume
- Type of business
- Average ticket sale
You may need to provide additional documentation or information in the application process, but having these in order gets you on the right track from the get-go. As noted previously, third-party processors (such as Square) often don’t even require this information at all, but that’s because you’re not getting a traditional merchant account.
How To Set Up A Merchant Account In 5 Easy Steps
While it may not be a completely stress-free experience, breaking down how to set up a merchant account can make things feel a little easier, at least. Here are the basic five steps you’ll want to know about before you start shopping.
1. Define Basic Needs & Goals
You’ll want to quickly size up any potential merchant account providers by having a clear set of services in mind to reach your goals. You may have a brick-and-mortar shop and need point of sale (POS) equipment. Can you take a contactless payment?
Do you want to easily expand online, so your customers can place an order and pay for it there? Multichannel selling tools help you sell online and through social media.
What type of inventory do you have? For example, if you’re a restaurant owner, you may want your inventory tools to include modifiers and low-stock alerts. If you have a retail shop that puts inventory online, you may want to create categories or subcategories of items for your shoppers to find what they need and your inventory to sync accordingly.
You ultimately want to make more sales, so what tools does the merchant account provider offer to help you do that? Can you take an SMS payment or send a payment link? How about offer currency conversion for an international sale?
Having the answers to these questions and clarifying what you need helps you narrow down the search for the right merchant account provider.
2. Compare Merchant Account Companies
Once you know what you need, it’s time to narrow your search. Good companies provide clear insights into what they offer and how much they charge online. So right away, you can weed out quite a few companies. When we see a company that provides little valuable information online and just wants you to call a salesperson to get a quote, it’s often a red flag.
Keep a critical yet open-minded approach in your search. Look for the companies that offer all of the sales channels you’ll need, whether that’s online, mobile payments, or a conventional POS system. We do a lot of the tedious research work for you here at Merchant Maverick, so feel free to check out our reviews. Within our reviews, you’ll find the features a company has, pricing, contract terms, and we scour the web for customer review sites to get an accurate picture of what reputation the company has. We also look at how fast you’ll get funding from the merchant account and what to expect from customer support. Take a look!
In this stage, you’ll want to gather quotes. While some quotes may sound better than others, you’ll want to compare what the bottom line is for your business. And that means you’ll want to come up with your average transaction size and crunch the math. Check out The Complete Guide To Merchant Account & Credit Card Transactions Fees to become a master in spotting a good deal.
3. Gather The Basics & Apply
As we mentioned earlier in the post, you’ll want to get all of the information and documents together before you apply. Check out the What Do You Need To Set Up A Merchant Account section that we shared earlier in this post and start gathering it all together.
The application process itself can tell you more about the company you’re working with. If you feel pressured or rushed to sign on the dotted line, we suggest pulling back and taking your time. You also may feel like you want to get this process over with because it’s overwhelming, but resist the urge.
We implore you to read and fully understand your merchant agreement and all of the sections that disclose fees. Many merchants get locked into an auto-renewing contract that’s surprisingly more common than you think among the big-named banks offering merchant accounts. Another common headache is equipment leases. We don’t typically suggest agreeing to an equipment lease. It is usually much cheaper to finance equipment and own it outright than to overpay through a long-term binding lease.
If you see something you don’t like, negotiate! After you’ve hopefully negotiated away any cancellation fees, should there be any, make sure those new terms make it into your contract before you sign. Promises by word of mouth mean nothing in this business. Check out How To Read, Understand, & Successfully Negotiate A Merchant Agreement For Your Small Business.
4. Set Up Software & Equipment & Take Your First Sale
The better merchant account providers provide a wealth of self-serve tools within a knowledgebase or have strong onboarding support should you need them. This is partly why checking out a company’s reviews will reveal if they provide good service or not.
Usually, no news is good news in customer reviews as far as setting up merchant accounts is concerned, but we love to hear merchants talk about how easy a particular solution is. Since your merchant account is likely cloud-based, you won’t have to download anything. However, you may need to check compatibility with software and any devices you intend to use, especially in the world of mobile payments.
Keep in mind that most solutions are built with ease of use in mind nowadays and have a built-in onboarding process for setting up credit card terminals. If you are setting up a shopping cart/payment gateway solution, you’ll likely use their in-house, proprietary solution or a plugin, making things pretty easy. However, having available support through this process is very important and should be available to you as well.
5. Continue To Monitor Your Merchant Account
Once you successfully set up your merchant account and have what you need to accept credit cards, send an invoice, sell online, and any other tools you need, watch your account like a hawk. Look out for how much you’re actually spending on processing. Setting your merchant account on auto-pilot is not a good idea because you may find certain fees you weren’t expecting.
You’ll want to pay attention to any recurring monthly package you’ve signed up for to see if you’re utilizing all of the services. You may also have helpful tools available that you didn’t know about. Paying attention to your statements can reveal more than you know. Check out The Complete Guide To Merchant Account & Credit Card Transaction Fees to help demystify your statement and make sure you’re getting the best deal.
Take The Next Steps To Set Up A Merchant Account
While I wish I could tell you there was a shortcut to an instant one-size-fits-all answer for your business, I can’t. Every business model needs specific solutions, and some companies are stronger at those than others.
Start with what you need, but keep in mind where you’re going, too. When your business grows, you’ll want a merchant account provider that offers the tools to support you along the way. Also, when you understand the basics of fees and rates, you can alleviate frustration as well as negotiate or find a better deal somewhere else if you’re overpaying.
With the tools and resources we’ve included in this post, you’ll be ready to find the right fit for your small business. If you feel like this is all a little too complicated, why not start with one of our best-of posts? We break down what credit card processing companies are best for different types of companies in These 9 Cheapest Credit Card Processing Companies Will Save Your Small Business Money.