how to set up a merchant account?
High Risk & Low Risk Merchat Services

how to set up a merchant account?

Question by Ashvin 217: how to set up a merchant account?
I would like to know the exact procedures for setting up my own merchant account on my e-commerce website without passing through a third party merchant account provider.

I know I have to open a merchant account with a bank. But how to I integrate it on my website??

Thank you

Best answer:

Answer by stymiee73
There are lots of merchant account account providers out there so shop around and get several quotes before choosing a provider. You’ll save yourself a lot of money that way. My first link below is a comparison worksheet to make organizing their rates easier. I also link to a calculator that does the comparison for you so you can see who is the cheapest in the long run.

When applying for a merchant account you’ll need the following items:

1) Verification of a US business checking account (a voided check works just fine)

2) Verification your business is legal (any document from the local, state, or Federal government works just fine. This includes Articles of Incorporation, LLC paperwork, Federal Tax ID, Occupancy License, State Tax ID, Fictitious Name Certificate)

3) A signed contract (provided by your merchant account provider)

Additional documentation is usually only required if your merchandise or account is considered high risk (e.g. there is a high risk for chargebacks). But this is rare. Personal financial documents should never be asked for, even for new businesses, as they are unnecessary.

You do not need to be a US based business but your business does need to have a legal US address and a US checking account. Otherwise it may be based on foreign soil.

Being approved will be based on the overall risk of your account. The higher the risk, the less likely it will be approved. Conversely, the less risk you present to the bank, the more likely you will be approved.

Risk is determined by several factors including:

1) Environment: The Internet is the highest risk and retail stores are the lowest risk.

2) Product sold: High stereo equipment is high risk, coffee mugs are low risk.

3) Personal credit: The better your credit the better your chances of opening a merchant account.

They balance the risk associated will all three areas and determine if it is worth it for them to take on your account.

Establishing a merchant account can be anywhere from a smooth and easy process to a nightmare. Where it falls is both the product of the merchant account provider and the merchant themselves. The better the communication between the two the smoother and faster the process is.

An account can be opened in as little as four hours or as long as a few days depending on when the application is submitted and the underwriting guidelines of the processing bank. The application process should never take longer then that without a clear and legitimate reason. If your application is taking two weeks to be approved and you’ve had little to no communication with your sales agent, something is wrong and you should consider canceling your application.

All merchant account providers require that every business sign a contract when establishing their merchant account. At the very least this contract will specify what the merchant’s responsibilities are as well as those of the merchant account provider. The entire contract should be made available to you before you sign it.

To integrate your merchant account into your website you will need to use a payment gateway. A payment gateway basically acts like a credit card terminal for your website. It’s software that runs on someone else’s server and they have an API for connecting to it. All shopping carts have built in support for at least one payment gateway and usually have the ability to support more so you don’t have to do any work to make the gateway work.

I recommend the Authorize.Net payment gateway as they are the most popular, best priced, and easiest to use. Plus they are enabled in every shopping cart by default so you don’t have to go find plug ins or anything for it to work. And if you want to integrate into your website yourself their API is extremely easy to work with. I linked to some free code with a tutorial that should help you along.

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Comment (2)

  • Jonathan D - May 18, 2014

    You will have to fill some paper work and apply. Once they accept you, they will contact you and get you set up. They will do all the work. Accepting you is a process required because some types of business are now capable of getting merchant services.

  • The merchant account will be integrated with your website through a payment gateway – an online service that merchant account providers use for transferring payment data between the merchants’ websites and the banks’ processing centers. The payment gateway will be integrated directly with your shopping cart. The integration process varies by providers and will be handled by their technical staff. In order to apply for a US-based merchant account, you have to comply with the following requirements:

    1. Your organization needs to be legally registered within the US. Applicants for merchant services have to be either incorporated as businesses within the state that they reside in or they have to be registered with the local municipality and obtain a “Doing Business As” (DBA) name. Individuals are not allowed to establish merchant account processing services. It is a good idea to obtain a Tax ID but if you do not have one, you can use your SSN instead. Foreign establishments are also excluded from obtaining US-based payment processing accounts.
    2. Your organization needs to have a physical address and a registered agent within the USA.
    3. You need to have a bank account with a US bank. This will be the account into which you will have your funds deposited into.

    If you meet the above requirements, you will be able to go ahead with the application process. Generally the following documents will be required during a merchant account application process:

    1. A merchant application – you will have to complete and sign this form. It includes general information about you and your business.
    2. A copy of your organization’s Articles of Incorporation, unless you are a sole proprietor.
    3. A copy of a voided check for the account that you will want your money to be deposited into.
    4. Advertising materials.
    5. Business or personal financials. Your tax returns for the last two years may be requested if your business is new.

    Once all required paperwork is submitted, the set up of your merchant account should take no longer than two business days.