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Should You Open a Merchant Account With Your Bank?

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opening a merchant bank account

As a business owner, you need your funds fast, and you need them readily accessible everywhere. Juggling multiple accounts and cards is a pain. And that’s probably why a lot of merchants choose to open merchant accounts with banks where they already do business. It’s convenient and if you trust them to handle your personal finances, you should be able to trust them with your business and credit card processing…right?

Well… maybe. We look at a lot of merchant service providers here, and not one of our top-rated providers also does consumer banking. Frankly, the main draw of companies such as Wells Fargo and Bank of America is that they promise next-day funding and value-added services such as cash advances and loans. There’s also the convenience of having all your accounts centralized in one place.

Unfortunately, convenience usually comes at a higher cost. It often feels like banks that offer merchant account solutions (three we’re specifically interested in are Wells Fargo, Bank of America, and Chase Paymentech) get into the game solely to keep customers and obtain more of their business. And that doesn’t always equate to industry-leading practices or the best deals for merchants.

There are a few major features of a merchant account that any business owner needs to look at. How soon your money is available is obviously the foremost concern. But you should also look at who’s really doing the processing. Then, there’s the availability and actual value of supposed “value-added” services that banks can offer.

How Soon Can You Access Your Funds?

A big draw for banks that offer merchant accounts is next-day funding…. if you open a bank account with them. Both Wells Fargo and Bank of America offer this feature. Oddly enough, Chase Paymentech (which is by far the largest and best-rated of the three) doesn’t offer this. Most funds are available within 2 business days, which is industry standard.

That’s not to say you can’t get next-day processing elsewhere. For example, Vantiv offers same-day and next-day funding (though you should expect to pay a bit more). And that’s not the only company that does. Our top-rated processors, including Dharma Merchant Services, FattMerchant, Payment Depot, and Helcim, all offer an option for next-day funding. Note: This option isn’t the default, but if qualify (as with Dharma or FattMerchant) or are willing to pay a little bit more ($5/monthly for Helcim), you can get this perk.

So don’t be fooled: You can get next-day funding even if you process cards through a company other than your bank.

Who Really Processes Your Transactions?

Here’s the deal: While Chase processes payments directly for its clients as the acquiring bank, both Bank of America and Wells Fargo actually process through First Data.

That’s not inherently a bad thing. In fact, this is pretty common in the payment industry. Helcim uses Elavon. Payline Data uses Vantiv. Just because a merchant service provider works through another, larger company, doesn’t mean you can’t get great service. You just have to make sure that whoever you choose is willing to go the distance. Helcim’s interchange-plus program, for example, looks nothing like Elavon’s pricing or contract terms, nor does Payline’s look like Vantiv’s.

That’s not the case with Bank of America, for example, which offers First Data’s Clover POS and similar contract terms. If you open a merchant account with Bank of America, it’s pretty obvious that you will only ever get access to what services First Data makes available to B of A, which I don’t like.

To earn a spot at the top in payment processing, you really need to go above and beyond. You need to innovate and commit to new offerings on a regular basis. Otherwise you wind up with a bad reputation and unhappy merchants.

Finally, this is important because as a merchant, you absolutely must be aware of who’s pulling the strings behind your contract. Read your contract terms and know them. That includes knowing when your contract is up and how to cancel. If your sales rep promises you no early termination fees, make sure the contract says that, or you have a waiver form to the same effect signed and attached to your contract. Need help with your contract? Reach out to us and we’ll be happy to help.

How Valuable are Value-Added Services?

You’ll often see banks offering value-added services for merchant account holders. This looks like a huge selling point, second only to the convenience of centralized accounts. These types of services often include:

Dispute managers: Tools to help you fight chargebacks. Most are just document organizers, though, and you won’t get any real support from your service provider.

24×7 support: Customer service and technical support are absolutely essential. 24/7 service is a good thing…as long as it’s good service. Larger companies tend to fail in this regard.

Payroll and scheduling services: Good for managing employees and encouraging new business.

Gift cards/loyalty programs: These can be invaluable tools for businesses.

POS systems: A bank that offers merchant accounts and a default POS can be a good thing…or it can be very, very bad. A POS is no small consideration, and you need one that works for all of your business needs. Chase actually has partnerships with more than 400 software companies, while Bank of America is really pushing First Data’s Clover platform. Make sure you get what you need and you aren’t pushed to sign up for something just because it’s convenient.

E-Commerce support and payment gateways: Brick-and-mortar retail and online shops are becoming more integrated, so if you want to sell online and in person, or you already sell primarily online, you should pay attention to what offerings you get: hosting, a domain, a ready-to-go payment gateway?

Virtual terminal: Turn your computer into a register to take payments over the phone, via mail, or even in person using a virtual terminal. Just make sure you need this service and you aren’t paying for it if you don’t need it.

Mobile processing: Banks and many traditional merchant service providers now offer mobile processing. Take Capital One’s Spark Pay, for example. Bank of America has the Clover Go (and still supports Bank of America Mobile Pay for existing customers). Some merchant service providers have these, but admittedly not all do. But there are plenty of standalone services that we think do the job quite well: Square, Intuit GoPayment, (which will actually open an individual merchant account for you), and of course, PayPal Here.

Loans and lines of credit: I can see why a lot of people might trust a bank over any other company offering these services. It often seems like there are a lot of shady companies promising financial services. But that’s not necessarily true and if you qualify, you can often get the best deals from nontraditional lenders. Check out our articles, Everything You Need to Know about Getting a Merchant Cash Advance and How to Get a Good Deal on a Cash Advance Loan, for more information.

But here’s the thing: None of these services are bank-exclusives. You can get a bunch of value-added services from any decent credit card processor. So don’t let yourself get suckered in.

A final note: In some cases, it might be worth paying higher rates for credit card processing to get these services for free or at a discount. You might even just add on a monthly fee for them. But you should absolutely compare the costs of standalone services to what your merchant service provider offers and see where the better deal lies. Don’t fall for supposed value of free services if you don’t need them, either. It’s your money. Don’t throw it away!

Final Verdict: Should You Process Credit Cards Through Your Bank?

Please, don’t fall into the trap of thinking a merchant account through your bank is the most convenient or best option. It’s not.

All your money will make it to your bank account in the end, and plenty of processors who aren’t your bank offer next-day funding. You can get all the same services — and sometimes even more — that you can get from a bank. That includes a large selection of POS systems. And if your payment processor is reputable and willing to go the distance, you can get better customer support and better pricing, too.

I can’t stress enough how important it is for you, as the business owner, to be informed about the payments industry. You have an astounding array of options, and more are cropping up all the time. So when your bank teller talks to you about a business account and credit card processing, I encourage you hear them out… then go do your research. Figure out what you need. Talk to other merchants. Look at the alternatives. Check out our top-rated processors if you want the best deal and consistently spectacular customer service. If you can’t decide, we are always here to help. Don’t hesitate to contact us.

Good luck!

Melissa Johnson

Melissa Johnson

Melissa Johnson has been writing about payment processing and mobile payments since 2014, and has been quoted in articles for Credit Karma and The Next Web, among others. She graduated from The University of Kansas in 2010 with bachelor's degrees in English and journalism.
Melissa Johnson

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Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.

    John Goldberg

    Nicely written and informative article!

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