Top Questions When Opening A Merchant Account

By Author: sifip
Total Articles: 686
Comment this article

Congratulations on starting a business! … and you're not giving away your services for free (right? ), so you realised you'd need a dedicated merchant account or an online payment gateway to accept payments. You're speaking with various merchant account providers about the services they provide in order to find the best fit for your company, but what questions should you ask? We've compiled a list of the top seven questions to ask when opening a merchant account for you to keep handy as you shop around.

What is a merchant account?
An obvious question...but it's critical to understand what you're signing up for. A merchant account is a contract between a business owner and a bank that allows the business owner to accept credit card payments and deposit them into their bank account. There are two types of merchant accounts: dedicated (for your business only) and aggregated (where your money is pooled with other companies), and each has advantages. Your merchant account provider may also provide a variety of services designed for businesses that accept payments in a variety of ways.

If you run an online business, ...
... for example, you'll want to work with a merchant account provider who has a virtual terminal, or a designated way for payments entered over the internet. If you accept payments in a retail setting, you should set up a merchant account designed for swiped credit card transactions.

Can I do both ACH and credit card payments?
The majority of merchant accounts will only allow you to accept credit card payments. However, in order to provide your customers with more payment options, it is usually worthwhile to shop around for a merchant account provider who can do both. ACH payments, also known as e-checks, allow you to process a payment directly from a bank account and are typically less expensive than credit card payments.

Is it secure?
Every merchant account provider must meet certain PCI compliance standards, but it's best to inquire about how they keep your customers' payment information secure and what you'll need to do as a business to achieve the same level of security.

How much is it going to cost me?
A simple enough question...unfortunately, the answer isn't quite so simple. In order to cover the cost of processing the payment, merchant account providers typically charge a percentage of the transaction amount in addition to the transaction fee. Visa, MasterCard, and Discover all charge different rates depending on the type of credit card your customer is using. Debit cards, as well as those that offer fewer points/rewards to the consumer, typically process at a lower rate than cards that offer cash-back bonuses and reward miles.

Most businesses divide credit card payments into three categories: qualified, mid-qualified, and non-qualified charges (qualified being the least expensive to process, and non-qualified being the most). This is the most common billing method and provides the most consistency when forecasting total cost each month. This is referred to as "tiered" credit card pricing.

"Interchange-plus" pricing is a billing model that is less commonly used. The merchant account provider will charge the small business owner the wholesale cost of processing the credit card payment through the best online payment gateway, as well as additional fees for processing the transaction, under this structure.

This billing model can be more cost-effective at times, but it puts business owners at the mercy of highly fluctuating costs and is often only available if your company already processes a significant amount of credit card transactions. It's usually a good idea to consult with your merchant account provider to see what works best for you.

Are there any additional fees?
The most common complaint of a small business owner after receiving the first bill is the appearance of a "hidden fee," which turns what appeared to be a good deal into a financial burden. Before opening a new merchant account, make sure to confirm all charges – some common charges that can arise include fees for security compliance and customer support.

Is there a contract involved?
Long contracts with steep termination fees were once the norm when opening a new merchant account. However, as the number of merchant account providers has increased in recent years, so have the options for business owners, with fewer and fewer providers charging cancellation fees and even fewer locking you into a specific service term. Please confirm this before opening your own merchant account.

What if I have questions?
Even if you've done all of your homework ahead of time, you'll undoubtedly have questions, and you'll want some assistance once you begin running payments. It's critical to work with a merchant services provider who is willing to collaborate with you. Learn more about the support and service options they offer, such as a phone number, email address, or online support centre.

Unfortunately, the merchant account industry has a wide range of providers, some of which provide excellent support while others provide subpar options. Before you sign up, read reviews and customer testimonials and get recommendations from other business owners!
So that's it – or at least some food for thought. Choosing the right merchant account for your business is a big decision, so make sure you know what you want to do and which company will help you get there.