Want to accept credit and debit card payments?  You'll need to set up a Merchant Account.  Don't know how?  Check out this guide for frequently asked questions about Merchant Accounts.

What is a Merchant Account?

A Merchant Account acts as a clearing account for credit and debit card transactions, allowing your businesses to accept card payments directly from customers.

Check out Business.gov's guide to Managing Finances for more information on accepting card payments.

How do I set up a Merchant Account?

If you're already in business and have a reliable sales history, you should be able to get a Merchant Account from your personal bank or through another financial institution that specializes in e-commerce.  There are many companies offering Merchant Account services, and you will likely come across a wide variety of "deals."  It is important to do your research to avoid scams or overcharging.

If you're just starting up, or don't have a sales history, you may need to work with a an independent sales organization (ISO) that acts a reseller, or middleman, between your business and the merchant processor.  An ISO can help relieve some the bank's risk by taking on your account, but it may not come cheap.   It is common for ISOs to charge fees for their services, but many new businesses accept this as a cost of doing business.

For more information, check out the Minority Business Development Agency's guide to Getting a Merchant Account.

How does my business receive the funds cleared through a Merchant Account?

Most transactions are electronically processed through a card terminal or online payment gateway.  The transaction is verified and the appropriate funds are confirmed by the customer's card provider.  Once approved, funds are transferred from the card holder's bank and deposited by the merchant processor. It sounds complicated, but the process can be complete in just seconds. 

Actually seeing payment takes a little longer, though - customer payments cleared through your merchant account are usually deposited directly into your designated business checking account within two to three days. 

What fees should I expect when setting up a Merchant Account?

Merchant Account fees are similar to those of interest rates for a loan.  Fees will vary based on the amount of risk your business poses to the bank or financial institution. 

Start-up costs generally range from $50 to $200, while monthly fees are significantly less - ranging from about $4 to $20.   In addition to these standard fees, merchant accounts often require "per transaction" and/or authorization fees that can range anywhere from $0.05 to $0.50.   

Depending your provider and account status, you could also see fees in monthly minimums, batch processing, early termination, customer service, etc.  Be sure to research merchant service providers to find the best rates and terms for your business.

What factors are assessed when applying for a Merchant Account?

When applying for a Merchant Account, the provider will assess many different aspects of your business.  Several of these factors include:

• The percent of transactions made where the card holder is not present (ex. online purchases)
• The type of products sold by your business (certain "high risk" products will require higher fees than others)
• The average amount charged per transaction
• The projected monthly sales volume of your business
• The type of cards your business accepts (some card companies are more expensive than others)
• Your business reputation (ex. business age, credit rating, etc.)

Is it worth the effort?

It may not be worth it for every business to accept credit and debit cards, but today, most businesses rely on credit and debit purchases as their main source of payment.  Many business owners argue that the pros outweigh the cons, and in the end, plastic affords their customers another payment option and helps their business stay competitive.

Additional Resources

• Determining the Best Customer Payment Options for Your Small Business - And Managing the Bad Ones
• How Small Businesses Can Protect and Secure Customer Information
• Federal Law Prohibits Showing Credit Card Numbers on Receipts
• Business.gov Guide to Accepting Cash and Checks