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What is a merchant account?

What is a merchant account?
Business Development Specialist
Yuliia Mamonova

A merchant account enables a seller to accept Visa and MasterCard payments on his website. You’ve heard it right. Being able to accept credit card payments isn’t something you can do on your own. It requires legal permission in the form of a merchant account. Thus, opening a merchant account is crucial for eCommerce success. Continue reading to find out what a merchant account is, how it works, and how to get a merchant account in 2020.

What is a merchant account?

First, let’s clarify what a merchant is. A merchant is a businessperson who trades products/services. In payment processing, a merchant is a legal entity that opts to accept payments online. Learn about 3 ways to accept payments online on your website

A merchant account is a type of bank account. You can get one with the help of a PSP (payment system provider) or individually (by heading to a bank yourself). 

Why do you need a merchant account?

The key reason why you do need a merchant account is your desire to accept payments online. Can you succeed in eCommerce without it? Doubtfully. The European market price for credit card transactions grew up to 9.2 billion euros. Such a rising trend can be seen with regard to the American, Asian, and African eCommerce. Alternative payment methods, such as cryptocurrency, ACH, and e-Wallets, are also on the rise. That’s to say, no matter what regions your target and what payment methods you prefer, you don’t want to miss a hype.

What is a merchant account?

How does a merchant account work?

As stated before, a merchant account is a type of bank account. How does it work? Basically, there are two main stages:

  1. The funds’ clients spend on your website transfer into your merchant account after the purchase is made.
  2. Then, all the funds deposited to your merchant account are transferred to your banking business account.

The regularity of transfers from your merchant account to your business account varies on a PSP of your choice. It usually takes from one up to 14 days. When signing up for a merchant account through a PSP, you are getting more than just an account. The PSP also provides you with access to the merchant interface. It allows you to monitor the dynamics and volumes of sales. 

You can also get PCI compliance, fraud and chargeback prevention, recurring billing, credit card authorization hold, e.g.Some of these options are free, while others will cost you extra. It depends on the PSP of your choice. The traditional merchant account allows you to accept Visa and MasterCard payments only. However, you can also opt to receive a wide range of other payment methods like:

  • eWallets (Skrill, PayPal, Stripe);
  • cryptocurrency;
  • wire transfers;
  • SEPA/SWIFT;
  • mobile banking.

What is a merchant account?

How to get a merchant account in 2020?

Opening a merchant account isn’t complicated when you know what steps to make. And we are here to help. To get a merchant account in 2020, you need to:

  • Answer the six main questions about your business goals and needs;
  • Collect all the documents required;
  • Prepare your website;
  • Fill in the merchant account application. 

Once you’ve done all the steps mentioned above, you will open a merchant account quickly and hassle-free. 

Six main questions about your business goals

Here is a list of six questions you need to answer before applying for a merchant account. It doesn’t matter what PSP you choose. Answers to those questions are traditional and are always required by a bank of yours.

1. What is your business nature? Is your business a high-risk, low-risk, or middle-risk? The answer to this question affects a wide range of things — the choice of a PSP, the fees, the type of a merchant account to apply for. 

Check out the list of the most common high-risk businesses:

  • Gambling;
  • Gaming;
  • NUTRA (nutraceuticals);
  • CBD;
  • Booking and travel agencies;
  • Escort;
  • Adult;
  • Telemarketing;
  • Bitcoin/Forex trading;
  • Computer software/hardware;
  • E-cigarettes;
  • Collection agencies

What is a merchant account?

2. What is your turnover? That is a must. Hence, get ready to provide your processing history documents. It demonstrates your financial state and card turnover within the last year. The processing history attached to the application boosts your chances for approval. 

3. What is your GEO? What countries are you planning to target? Do you aim to reach out global audience any soon? While applying for a merchant account, you will be required to specify these details. Clarifying your GEO also helps to find the best payment solution possible. When you know your target countries, it is easier to choose the local payment methods and boost conversion. 

4. What payment methods do you prefer? Different businesses demand different payment models. Selling vitamins requires recurring billing, while airline tickets distribution doesn’t. Analyze your product nature. Do you want to offer a one-time payment option or recurring billing or both?

5. What payment types do you want? Various businesses require different payment models. For example, online media requires a subscription billing model, while a travel agency doesn’t. Think about your product nature. Do you need a one-time payment option or recurring billing or both?

List of documents to open a merchant account

Check out the list of documents to open a merchant account:

  1. Certificate of Incorporation;
  2. Certificate of incumbency;
  3. Local documents as per company jurisdiction which displays company directors and owners; 
  4. Utility bill/Bank statement/Rental agreement under corporate names proving company location;
  5. Valid ID copies for all company directors and owners.

Website requirements to open a merchant account

There are specific website requirements you have to follow. Otherwise, your site won’t compile with all the Visa and MasterCard demands, and your application won’t succeed. Ensuring checkout safety together with enhancing products and delivery descriptions, boost your success. Also, it is essential to create a Terms & Condition and a Privacy Policy page

What is a merchant account?

How to apply for a merchant account?

To apply for a merchant account, you need to fill in the merchant account application. The PSP of your choice will handle one to you. The company’s representatives will also provide you with a detailed guide on what steps to make. The high-quality PSPs guarantee customer support during the entire application journey. Fill in the form to get a merchant account easily. 

What are the merchant account fees?

Merchant accounts go hand in hand with different fees attached to them. However, not all of which are always clearly identified in contracts, including:

  • Application Fees;
  • Setup Fees;
  • Monthly Fees;
  • Discount Rate;
  • Per-Transaction Fees;
  • Cross-border Fees;
  • Rental fees for a credit card terminal ( in case you run a brick-and-mortar store).

Thus, don’t be afraid to ask questions when applying for a merchant account. Additional fees can increase the total fee per transaction, and you don’t want to overpay. See How To Minimize PSP’s Fees? Have you got any questions left? Leave a comment below and we will provide you with all the information about a merchant account today. 

fast and smooth payments on your website by Ikajo International

1 COMMENTS

  1. Guest

    ปั้มไลค์

    Like!! Great article post.Really thank you! Really Cool.

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