Before you apply for merchant account services, you should understand what it is and how it can benefit you. A merchant account is an important stepping stone for new businesses, or those looking to expand. They are bank accounts specifically for businesses. They allow an organization to accept credit or debit card payments. There is a different type of merchant account for each type of business, and it is essential that you research which one best works for you. Learn more about how merchant accounts work.
How to Prepare
Now that you’re ready to apply for merchant account services, you’ll need to gather some information about your business. If you’re a sole proprietor, you can use either your Social Security Number or your Employer Identification Number (EIN) as a tax identifier. Payment processors report gross annual card sales to the IRS and mail out a 1099-K form to you each calendar year totaling your card processing sales. If your business is a partnership, an LLC, or a Corporation, then you will need to provide your EIN. If you do not have an EIN yet, it can be quickly applied for on the IRS website. If you have a business trade name, also known as a Doing Business As, or DBA name, that will need to be listed also, as that is the name your clients will see on their credit card statements. Lastly, you will need to provide an estimate of your transaction volume:
- Total Card Sales each Month
- Highest Transaction Size (for a single charge)
- Average Transaction Size
How to Apply for Merchant Account Services
Before the underwriting process, a sales agent will provide you with an application or you can complete an online application. This is called the Merchant Processing Agreement. This allows you to apply for merchant account services. Your MPA is where you will provide your EIN, bank routing, and account number on a voided check, and proof of business site occupancy. This could simply be an interior and exterior photo of your office or a lease agreement with your landlord. In the application, you will also select the types of payments you would like to be provided by your new merchant account (Visa, MasterCard, Discover, and American Express). Some types of payments can act as add-ons, like e-check payments, and may offer discounted pricing when combined with a basic merchant account.
The most noteworthy factor of your MPA is the complete access you are granting the processor to your bank account. They will now be able to extract processing fees, deposit funds, or withdraw funds from chargebacks. Depending on the agreed terms and conditions of various processors, you should be aware that:
- Your processor places limits on your processing volume for security purposes (these can be increased over time as your business grows)
- Your merchant account is approved to sell only the category of products or services listed on your application
- Your merchant account is exclusively for your business that is listed on the application, and should not be shared with others
After your application is submitted, the underwriting process will take place. This is not a scary procedure, just the system that a bank processor will use to vet your business before approving you. Some qualifications they will examine include your length of time in business, if your prone to chargebacks, and what the billing and refund policy is of your organization. The underwriter will also look at the length of time it takes your business to deliver the goods/services from the time that the customer’s card is charged. If your business charges long before a service is provided, the cardholder has more opportunity to cancel the transaction. If a business cannot provide the product the cardholder ordered, the cardholder will dispute the sale on their card, and a chargeback occurs. This makes the merchant liable for the returning of the funds to the cardholder.
Enjoy the Benefits
The process may seem extensive or intrusive, but the decision to apply for a merchant account is the best choice a business owner could make. It opens up a whole new market for your organization while staying relevant to your already loyal customers. If you’re interested in exploring the benefits a merchant account can provide your business, visit our website. If you’re ready to apply for a merchant account today, then click the link below.