Merchant Accounts

Getting an internet merchant account is not as hard as it may seem. There are a few things you need to know once you have a basic understanding of how merchant accounts work, you will know what solutions work best for you and what you can avoid. Below are a list of basics you need to know about merchant accounts, service providers, security standards and so on. Please bookmark this page for future reference.

If you are in business and want your customers to be able to pay you using either a credit or debit card, you need a merchant account. The type of account you need and the services you need depend on a few factors. For instance, will you be accepting credit cards online, at a retail location, in the field using a mobile phone, or over the phone? Depending on the type of customer interaction regarding how the credit card order is placed, you will need varying hardware or software in order to accept credit card payments. In any case, you will need a merchant account in order to take credit or debit cards no matter how the customer’s order is processed. A merchant account provides a system to securely take the customer’s credit or debit card information, check to see if the customer has the funds available to pay for the purchase, initiate the transaction and debit the customer’s debit or credit card for the amount of the order. Once the payment is made, the credit card issuer will transfer funds to the merchant service provider who then credits the funds to your business checking account, minus their fees. This allows you to take payments from customers online, over the phone or in person!

Before you run off and get a merchant account, you will need to get the following items checked off on your list. Doing so before talking to a merchant service provider will make the process that much simpler, and less time consuming.

Corporations and LLCs:

  1. A legal entity – You will need to have a legal entity set up for your business. This can be an LLC, C-Corp and so on.
  2. EIN number – An EIN number stands for Employer Identification Number and is what the IRS uses to identify your company with.
  3. Business checking account – This will allow the merchant service company to deposit transactions directly into your business checking account.

Once you have these three things, you can then start the application process that your chosen merchant services provider requires. Sole proprietors do not need these items, and can sign up under their personal name, Social Security Number, and personal bank account. The next sections will talk about the underwriting process.

Sole Proprietors:

Sole proprietors do not need the three items listed above for Corporations and LLC’s and can open a merchant account under their personal name, can use a Social Security Number as their tax ID number, and can also use a personal checking account to receive deposits.


There is a high level of risk merchant account providers and their partner banks take on when approving a new merchant. Chargebacks occur when customers dispute activity on their credit or debit cards and request their credit card provider issue a refund to them. These refunds are debited against the merchant services provider and their partner banks creating a lot of potential liability. As such, merchant service providers and their partner banks go through an underwriting process to determine the level of risk each merchant poses to their company. Depending on the underwriting process, the merchant service provider or bank may ask for a lot of documentation like tax returns, credit checks, background checks and so on. Be prepared to answer a lot of questions and be honest and upfront about anything that could potentially classify you as “high risk”. The more upfront you are in the underwriting process the more trust you will build with the merchant service provider.

Due to the risk merchant service providers and their partnering banks assume when approving merchants for a merchant account, certain factors can make it hard to open a merchant account. Some of these are listed below:

Bad Credit – This is by far the most common reason for a denial, however, there are merchant service providers out there like who work with high risk applicants.

New Companies – A brand new company newly formed is a much higher risk than an established company who is just looking to change providers.

Type of Industry – The type of business you are in can also bring up a red flag. For instance, industries where there has been a history of abuse by other people can make it hard to obtain a merchant account. Types of industries commonly having a hard time getting approval are listed below:

  • Pornographic websites
  • Guns and ammunition
  • Online gambling
  • Free + shipping type offers
  • Multi-level marketing companies
  • Affiliate marketing companies
  • Group buying websites
  • Penny auction websites
  • Discount memberships
  • Gym memberships
  • Membership clubs
  • Recurring billing products
  • Nutritional supplements

Expected Transaction Volume – If you apply for a merchant account and indicate you need a high level of processing power, your chances for obtaining a merchant account will greatly diminish. The more volume you do, the more likely you will face more chargebacks and the more risk you will pose to the merchant services provider. Only apply for processing volume based on your expected volume, be conservative, and only ask for the minimum you need. If your volume picks up, you can always apply for more volume later. Build trust with your merchant services provider and you will eventually get to the point where you can have virtually unlimited processing volume.

Fulfillment Time – If it takes you three weeks to fill an order, there is a higher likelihood customers will issue chargebacks. Long fulfilment times can be detrimental to obtaining and keeping a merchant account in good standing.

Average Ticket Size – On the typical application, the merchant services provider will want to know what your average ticket size will be. If you indicate an extremely high average ticket price, the chances of approval will be greatly diminished. The larger transaction size means a higher cost if there is a chargeback and more risk the bank and Merchant Services Provider must take.


Getting a merchant account is not as difficult if you follow the advice we have offered and already have finished the things included in the “Getting Started” paragraph. Once you get a merchant account, make sure you are staying on top of your customer service to minimize the number of chargebacks that you have. Keeping your merchant account in good standing is vital to the long term success of your business. Failing to maintain good standing with any merchant service provider will make it much harder to obtain a merchant account in the future. Contact today to speak to one of our merchant service account specialists!


Article Name: Merchant Accounts
Author: Robert Thomas
Description: Setting up a Merchant Account is an important part of your business success. Merchant Accounts can be hard to navigate so read the information in this article to learn more.

Create Your Account Now to Get Started: