What should you know about merchant accounts?
Any business wants to sell a dress or software or music, he needs a merchant account. Merchant account is a kind of bank account which permits businesses to accept payments through debit or credit cards. A retailer, a merchant bank and payment processor sign a contract to settle the amount processed through credit card and/or debit card transactions. When a consumer purchases a product or service and pays with a credit card, the amount first goes to the merchant account and from there it is settled in the business bank account. Settlement in the business account takes 7-15 days. If you are going to establish an ecommerce business, you will be required to accept credit card payments online, you must have at least one internet merchant account although you already have a merchant account.
Obtaining a Merchant Account
Applying for and approval of a merchant account is not an easy process, but it does not mean a smaller number of providers are available in the market. Provider sets various benchmarks to reduce the risk and determine whether to approve a merchant account application:
- Kind of business -High, low or Mid Risk?
- Duration of business
- Business history like bankruptcies, defaults, etc.
- Personal credit history of the merchants
- Processing history of the merchants
If merchants are involved in a higher risk industry, they must be prepared to pay higher transaction fees. The vendor may primarily ask for higher transaction or other fees to offset the risk. If the business becomes well recognized, the fees can be reduced later.
What are Internet Merchant Accounts?
An internet merchant account is a kind of merchant account specially designed to hold the earnings from the online payment processing through credit cards. You must have observed the difference in fees between a merchant account and internet account, if you already have a merchant account. Usually, the internet merchant account fees are higher as higher risk is involved in online payment. A merchant can provide his service to any part of the world because of the online payment facility.
Merchant needs a payment gateway to authenticate the submitted credit card information by consumers, while he is extending the facility to accept payment through credit cards. The payment gateway accepts the transaction request and sends it to the credit card company for approval for payment. A Few merchant account dealers (such as Shopify) extend one-stop solutions that don’t need a separate payment gateway.
To know more about the merchant account, please click here
How is a merchant’s risk determined?
It depends on by several aspects, including:
- Credit scores
- Credit card processing history
- Bank statements
Questions Merchant should introspect, while going to apply for a merchant account
1. Monthly Fees.
2. Duration of deposits held.
3. What are other fees charged? Hidden fees should be clarified initially, if there are gateway, chargeback, authorization, batch early termination, return , and point-of-sale software fees etc.
4. Customer Support.
5. What is the expense of buying out contracts?
6. Lastly, you require to ensure that your end-to-end payments system is PCI compliant.
Finally, Let’s discuss the documents required to process the merchant’s account
To open a merchant account, you will be required to gather many essential docs. Along with an application, the below documents must be presented to processors:
- A secure, working valid website and domain registration
- A Social Security Number(SSN) or Employer Identification Number(EIN)
- A pre-printed voided check or a bank letter
- A valid, government-issued ID, such as a driver’s license or passport
- Latest three months processing statements, if it is applicable
- Latest three months’ bank statements
- A chargeback ratio below 2%