requirements to open a merchant account are the following unless
your business falls into a high-risk category. I will explain high
risk in a moment but here are the basic requirements to have a merchant
application approved. A. Business checking account B. A web site
or physical location C. No open bankruptcy D. A product or service
that is not on a restricted merchant list Many processors will work
with you if you are willing to submit to special conditions if you
have less than perfect credit or a risky type of business.
What makes a business
risky to the processor?
There are a few reasons why a processor would consider
a business risky and possibly decline the application. I have listed
reasons below that would lead a MSP to consider a business high
High monthly sales volume - Merchants who process
large ticket items (those over $500) and/or have a High Monthly
Sales Volume (usually over 25K per month) pose a special problem
to merchant service providers and to the merchants themselves. Merchants
that fall into this category need to be aware that Merchant Service
Providers will be more thorough on reviewing Merchant Applications
because of the high potential for Fraud and potential losses. They
usually ask for more documentation up front including copies of
Tax Returns and Financial Statements. This additional documentation
helps legitimize your business.
Derogatory credit - In the not too distant past,
it was virtually impossible for a person with a poor credit history
- or no credit history at all - to receive a merchant account. Heavily
regulated banks are subject to strict controls over their activities;
rarely saw fit to grant merchant accounts to those without a sterling
credit history. Today, it is much easier to find a company willing
to give a Merchant Account to a Merchant with a poor personal credit
history or even no credit history. The requirements and terms of
service may vary a little from ISO to ISO. If you fall into this
category, expect to pay a slightly higher Discount Rate and be prepared
for Reserve Account.
Type of business - Each merchant service provider
restricts certain types of business that they have had problems
with in the past. There are too many types to list here but your
ISO will know if your business is restricted. Some types of businesses
that may be on a MSP's list are adult related businesses, international
merchants, higher ticket items that are not sold in a retail environment,
business opportunities, credit repair and multi-level organizations.
MSP's consider these types of business risky due to the high possibility
of chargebacks. There are some MSP's specialize in higher risk accounts
but will charge higher rates, require a reserve and or delay fund
deposits for 2-3 additional days.
I am starting
to understand how all this works but I am going to open an online
Online stores are extremely popular these days.
Merchants can continue to work at their day job and work on their
online store in the evenings. This allows merchants to ensure their
store is a success before quitting their jobs. There are a couple
of ways to accomplish this but perhaps the most efficient, convenient
way - and, depending on the circumstance, the most cost-effective
- is to use real-time processing via a gateway. This process entails
your customer inputting his/her credit card information on a secure
(SSL-encrypted) site, and in real-time. The MSP receives this information
from the gateway. Just as cars use a tunnel to get from one place
to another, the gateway serves as that tunnel to transmit information
from the customer to the credit card processor. At first, within
seconds of the customer submitting his/her credit card information,
the acquiring processor either authorizes the transaction or declines
it. Receiving an authorization code only reduces the credit limit
of the card but there is not a charge to the card. Subsequently,
the approved customer's information becomes "captured"
resulting in the customer's credit card being charged for the authorized
amount. This capture becomes part of the merchant's batch, and travels
trough the gateway again. The acquiring processor then knows to
finalize and settle the transaction. Settlement takes place as funds
resulting in a credit to your checking account.
Will I also be
able to accept check payments on my web site?
Yes, make sure that the merchant service provider
knows your interest to offer this important payment option to your
customers, and can accommodate this service. On the web page order
form, you can have one section where the customer may put in his/her
credit card information and another section where the customer may
put in the check information required (e.g., routing number, account
number, etc.). The merchant service provider can tell you all the
checking information that is necessary to collect from your customers.
The checking information goes through the payment gateway just like
the credit card information travels.
While I now understand
the components involved with online credit card payment processing,
how do I actually implement this on my web site?
If you have designed your website, you can easily
add another page called the "Order Form". If you rely
on the expertise of your web designer, the designer can do this
in fifteen minutes or less, unless you need special customization
that may entail more time. However, an order form is relatively
simple to add. Remember, you still must have a secure server with
certification, a gateway, and a merchant account. The shopping cart
software is optional (though highly recommended) and can be integrated
into your website by you or your designer with the instructions
provided by the shopping cart provider.
Here is the good news, by choosing the "right"
merchant service provider; you can have access to its secure server
and its gateway. There are merchant service providers who have their
own secure server, their own gateway and their own shopping cart,
and do not rely on other companies to fill those needs. In other
words, you can find a "one-stop shop" solution. It is
essential that you ask any merchant service provider if they have
their own gateway or outsource it to another company. If they depend
on another company for the gateway, you will be dealing with at
least two organizations (i.e., the merchant service provider and
gateway company), and they must work together.
Horror stories abound about the lack of coordination
between service companies, leading to lots of headaches, heartaches,
and possibly, financial woes for you. Use one merchant service provider
that provides all the essentials.