In order to process credit card, debit card, and electronic check transactions, you must have a merchant account. This is a special type of account that allows businesses to process these transactions in real time. The business and the bank have a contractual agreement where the bank promises to pay for all valid transactions. However, the business must make sure they are following banking policies put in place to prevent fraudulent transactions that cost both the business and the bank money. If you want to accept electronic transactions on your website or in your brick and mortar business, then you must have a merchant account.
A merchant account requires you to have a bank account to deposit the money into. Therefore, you should shop around the banks in area to find the best deal on a commercial checking account. While it may be tempting to use your personal checking account, especially if you are a solopreneur or very small business, this is not a good idea for many reasons. In addition to making it enormously difficult to separate your personal transactions from your business transactions, any refunds and reversals will come directly out of your account. This could cause big problems in your personal life if you are using your person account to pay house payments and other living expenses.
There are a number of places where you can open a merchant account. Therefore, don’t feel obligated to use the services of the bank where you have your commercial bank account. Although banks do offer merchant services, you can often find a better deal with independent organizations or third-party merchant service providers. Ask other businesses owners you trust who they use to process their electronic payments. Another option is to do a search on the Internet. You are sure to get hundreds of results.
To qualify for a merchant account, your account must be located in the United States. You will be required to show proof of address for your business. You will also need a valid Federal Tax ID or social security number, a valid driver’s license of state identification, articles of incorporation, tax returns, and your checking account details. The merchant will charge an application fee as well as ongoing service fees. It is a good idea to compare merchant accounts to find one whose fees fit your business budget. For additional assistance in setting up a merchant account, talk to an accountant or your banker.