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Merchant Accounts

To allow your online business’s customers to make payments for the goods or services they have bought via a credit card, you need to open what is called a merchant account. In the early days of the Internet gaining financial services like a merchant account for any online business was almost impossible. Today with a burgeoning Internet economy, all of the major clearing banks that you may already have contacted about your business’s finances can set-up a merchant account for you.

In the early days of your online business you may take payments using systems like the well established PayPal payment platform. This kind of payment mechanism is also linked to the credit card system, but most of the customers your online business will attract may not have a PayPal account, or prefer to simply use their credit card in the way they are used to.

How to Open a Merchant Account
A merchant account is in fact a line of credit that your bank opens for your online business. This pool of money is used to ensure your business receives the credit card payments it is due without having to wait for the credit card companies to process the payments themselves.

As your merchant account is in effect credit, the amount of money that your online business is allowed to have will be negotiable with your merchant bank. You may also see these banks referred to as acquiring banks. Also, it’s likely that you will have to undergo a credit check before the bank opens your merchant account.

Note that if you already have a business with a physical shop front that accepts credit card payments, you still need to open a separate account for your online business. This is because the higher risk associated with cardholder not present transactions means the rates you will pay for your online card payments is likely to be higher than the payments you take in your physical store.

The actual credit card payments that your business receives are moved from the card holders account to the merchant account your online business has opened via a credit card processor. The credit card processor may also help you locate a suitable and open a merchant account for your online business. Note that American Express have their own specific acquiring banks that you must use.

Payments and Costs
The money that will move from the customers credit card account and into your merchant account should happen within two to three days of the transaction successfully completing on your website.

The costs attached to your merchant account should be considered carefully. Your finances need to take into consideration any set-up fee that the merchant bank may charge. There will also be a per transaction fee and perhaps a monthly administration fee to operate your account. Ensure you are fully aware of the costs you have to meet before you set-up your merchant account. Shop around as rates can vary across different service providers.

Merchant Account Checklist
As the finances of your online business grows you will want to expand the number of payment option your website offers. A merchant account is now easier than it has ever been to open, but the acquiring banks will still look closely at your business. Use the checklist below to ensure you have all the information a merchant bank might request:

Outline in detail what your online business sells and how it operates.
The full URL of your website.
A full business plan that covers your existing and projected income.
Your personal finances may also be looked at in detail, so be ready with this information.
The average transaction values of the goods sold through your online business must be calculated so that the merchant bank can extend enough credit to your business.
Give details of your server system and the security measures your online business has in place.

All merchant accounts offer basically the same services, but as with any other financial product each merchant bank offers its own unique set of features for its merchant account holders. This could include help with credit card fraud. As costs can vary greatly form one bank to the next, it’s import to ensure you get value for money when you open your account.

Also, don’t forget you will need to set-up secure payment systems on your website. Talk to your website designers about this as your merchant bank will want to see that your site has all the proper encryption in place before you can start to accept credit card payments.