Merchant Account FAQ

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Merchant Account FAQ

We’ve put together a merchant account FAQ, chock-full of questions and answers regarding merchant services, merchant accounts, high risk merchant services, and everything else payment processing related. This FAQ is based on thousands of conversations with business owners just like yourself, and we use it in presentations, webinars, and to educate our clients about the merchant services industry.

What is a merchant account?

A merchant account is a special type of bank account that allows business owners to accept credit and debit cards as a form of payment. Merchant services providers bridge the gap between businesses and customers.

Who can use a merchant account?

Any business can use a merchant account, with the proper documentation.

How do I get a merchant account?

The easiest way to get a merchant account is to visit this page. However, you should also do your own research into merchant services companies and merchant account providers. Some providers do not have the capability to process transactions for every type of business, so it’s important to find that out before you apply for a merchant account.

What is a merchant services provider (MSP)?

A merchant services provider is a company that works with merchants to get them merchant accounts. While some MSPs sell their own product, the common practice is to outsource their sales division to ISOs.

What is an ISO?

An independent sales organization (ISO) is a company that sells a product or service for another company. Some ISOs are huge, others some are small.

What are acquiring banks?

Acquiring banks manage and mitigate the risk associated with credit card processing, and since they assume risk, they also have a say in merchant account approvals.

How much should I expect to pay for a merchant account?

For most businesses, you should pay 2% – 5% of your credt card processing volume. Fees and rates vary no matter what business you’re in. One of the factors used is the MCC/SIC code for the business. Some industries present more risk, and more risk equals higher fees.

How do I get paid from a merchant account?

During the application process, you will need to provide information for your business checking account. Funds will be deposited in your business checking account as soon as they are cleared.

When do I get paid from my merchant account?

The funds from transactions are typically transferred to the business checking account in 24-48 hours. However, some businesses may have different stipulations.

What determines how much I pay for a merchant account?

The type of business you are in, your SIC code, your business history, and your processing history are the biggest factors. There are several other minor factors here.

Is it worth it?

This is a decision you have to make for your business. The Small Business Administration recommends that businesses accept credit cards, as they are the fastest growing form of payment, are easy for customers to use, and have a proven track record of increasing sales.

What is a high risk merchant account?

A high risk merchant account is needed for businesses that accept card-not-present transactions, work in certain industries, or have unique business components or processes. For more information on high risk merchant accounts, click here.

What is a reserve?

A reserve is a dollar amount that is withheld from the merchant as a form of collateral. The reserve can be reviewed and released with a minimum of 90 days clean processing history.

Will I need a reserve?

You may. High risk merchant accounts are more likely to need a reserve, although they are done on a case-by-case basis.

What is a chargeback?

A chargeback is a disputed charge on a credit or debit card. Sometimes this is customers trying to get a product for free, sometimes the merchant never provided the service requested, and other times it can be the result of fraud. Chargebacks cost the merchant, the acquiring bank, and the merchant services provider. They are never a good thing.

How do I get a rate review?

Ask for one! Businesses are more likely to get a rate review if they have established clean processing history.

What information is required to apply for a merchant account?

Most applications require adequate business information, personal information, verification of the business (through pictures or a business license), previous processing statements, and verification of owner(s)’ identity (through a driver’s license or government issued ID).

Why do I need to supply all of that information?

Approving a merchant account is a formal legal underwriting process. It involves several banks, including the merchant’s business bank. By verifying business and owners identity and information, risk is alleviated and banks and MSPs can be sure that funds are going where they say they are going.

How long does the approval process take?

The approval process for most merchant accounts takes between 24-48 hours. Sometimes, an account requires additional information in order for underwriters to make a decision. This can increase the length of time it takes to approve a new account.

What if I have bad business credit?

Business credit has some impact on whether or not your account will be approved, but other factors such as processing history will have a larger influence.

What is the difference between swiped and keyed transactions?

A swiped transaction is one that is physically swiped using a terminal or Point-of-Sale system. A keyed-in transaction is one that is physically typed into a terminal, gateway, or POS system.

What kind of cards will a merchant account allow a business to accept?

All of them! However, since American Express and Diner’s Club have different fees and stipulations, they require additional verification to be added to a merchant account.

If I have multiple locations, do I need multiple merchant accounts?

Multiple locations require multiple merchant accounts. However, they can use the same bank account.

What equipment do I need?

This depends on how you want to accept cards. Brick-and-mortar stores usually require tabletop terminals, some smaller businesses can use mobile processing devices to accept cards in food trucks, on-the-go, or in home businesses. Ecommerce retailers and service businesses can use a payment gateway, as their businesses are typically computer- or web-based.

What is a point-of-sale system?

An advanced hardware and software combination that extends beyond simply credit card processing. These systems can track inventory, compile data, and generate reports based on custom parameters. Most restaurants use some sort of POS system.

Can I use my cell phone to process transactions?

Yes! Most merchant service providers offer a mobile option for non-traditional businesses – such as home businesses and event-based sales.

What is a virtual terminal?

A virtual terminal is web-based software that allows merchants to accept cards as a form of payment. It can be run in most web browsers.

What is a discount rate?

The amount you are charged per transaction as a percentage of that transaction.

Is there a cancellation fee?

Some MSPs have cancellation fees, while some do not. Ask your MSP if they have one, and be sure to read the fine print even if they don’t.

Why do different cards cost different amounts?

There as many payment cards as there are issuers, and they all charge different rates. Cards that use the most forms of authentication cost less per transaction, while cards that offer rewards cost more per transaction. Each card is different, so there are two generally accepted options for pricing structures for a merchant account.

What is an interchange-plus pricing structure?

A type of pricing structure that charges a merchant the rates that Visa/MasterCard charge, which fluctuate daily. With this structure, merchants can have fluctuating monthly costs.

What is tiered pricing structure?

A type of pricing structure that prices cards into buckets – all the cards in each bucket get the same rate. With this structure, merchants have regular monthly costs.

Why does American Express charge a different rate?

American Express pushes the cost of their customer service and value-added services to merchants.

How can I reach customer service?

Look for the number on the side of your terminal. Call it. Ours is 860.615.1330. There should also be a merchant account number of merchant identification number. You’ll need this number to receive support.

What is EMV?

EMV stands for Europay, MasterCard, Visa, the three founding members of the chip-and-pin standard. For more information, see this three part series from our blog.

What do I need to do to be EMV Ready?

Merchants that are not equipped to process chip-and-pin transactions will be held liable for fraudulent transactions after the October 2015 deadline. See this post for more information.

Will a merchant account work with my website?

Yes! Like mobile payments, most MSPs are able to provide this service. If not, call another merchant service provider. For more information, visit this page.

What if my business is outside the USA?

Some options are available depending on your business. Call one of our sales representatives and we can address this for you.

How do I sign up for a merchant account?

Take a look at this page and decide what the best account for you is. Fill out the form on the corresponding page and we will be in touch with you shortly. Or, you can call us to discuss what options are best for you and your business.

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