Finance, Credit, News | November 17, 2011

Applying for a Merchant Account as a Small Business

A concept that new business owners need to understand is the difference between business bank accounts and merchant accounts. Business bank accounts are used as a means to dealing with the expenses of opening a business. Merchant accounts and merchant account providers deal only with processing credit and debit card transactions. Since few businesses these days are able to operate on a cash-only basis, even small business owners need a merchant account to accept credit or debit card payments from customers.

There are different types of merchant accounts available to businesses. A retail account is designed for brick-and-mortar businesses. A customer must physically present his or her credit or debit card for payment. Mail order and telephone order accounts (MOTO) allow merchants to accept credit and debit card payments for transactions involving mail order or telephone orders. A business that conducts online sales must find an acquiring bank that processes online payments.

Ask plenty of questions before making a deal with a merchant services provider. Each type of account has service charges and fees that apply. In addition to the standard transaction fee, most credit card processing providers charge an application fee or set-up fee, equipment rental fees and sometimes a charge back fee. There may be other fees attached to the service such as cancellation fees, customer service fees and an annual membership fee. Make certain that you can afford the cost.

Most banks offer merchant processing services. Applying at a local bank that offers these services may be your best option, especially if your business is new or small. Opening a merchant account at the same financial institution where you normally do business can earn you some extra benefits.

Qualifying for an account may be difficult when you are first starting out. In a way, you are applying for an unsecured line of credit when you apply for a merchant services account. A bank or merchant services provider assessing your level of risk views a healthy business credit rating as a positive indicator.

Setting up an account with an acquiring bank or other merchant services provider is a process similar to applying for a credit card. The first step is to complete an application. The bank will review and validate the information you provide and then notify you if you are approved.


Normally, acquiring banks will allow businesses without websites to set up a virtual terminal, which is a form of secure Web site. Small and home-based businesses often select to use a terminal to swipe credit cards or use a virtual terminal to process transactions.

Before selecting a merchant account provider, look for a company that deals with all the major credit cards. The ability to accept a wide range of credit cards offers your customers more convenience. Most merchant services providers allow you to open a single account that enables you to accept different types of credit cards.

Always compare providers. The fees banks and other merchant account providers charge to process credit cards vary. Some also set volume limits and minimums on purchases. When negotiating the terms of a contract, let your provider of choice know if you’ve been offered a better deal elsewhere. This may get you the terms you want. Check the Better Business Bureau to learn more about the provider’s reputation and business rating before signing a contract.