Opening a Merchant Credit Card Account

Opening a merchant credit card account by Instabill

Many financial establishments in the payments-sphere offer merchant credit card account solutions. However what the newcomers to the online business world need to know is that it is not necessary to have a bank account for merchants opening a merchant credit card account. Rather what is important is to have a complete documentation of your business and a stable credit history.

Criteria for Opening a Merchant Credit Card Account

Acquiring banks are taking a significant risk in offering merchant account services. Thus, banks need to delve into a merchant’s history to get an idea of the level of risk it is taking by offering its services. When opting for a merchant credit card account from a bank, below is what merchants need to provide, and why:

  • Credit History: By reviewing a prospective merchant’s credit history, it provides the acquiring bank an idea of the merchant’s responsibility. Obviously a strong credit history is preferred.
  • Previous Bank/Trade references: Strong reference letters from previous acquiring banks go a long way in establishing credibility with a new acquirer.
  • Financial Statements: Similar to credit history, providing financial statements showing strong or weak financials, gives the acquirer an idea of what exactly it’s taking on.
  • Tax Returns of at least two years: Acquiring banks prefer law-abiding, taxpaying merchants. Without at least two years of tax documents, prospective merchants are facing an uphill battle in getting a merchant account.
  • Previous Processing History: As a provider of merchant services, viewing a prospective merchant’s prior processing history is probably the most critical KYC document. Processing history reveals what concerns banks most – history of chargebacks and returns, and ultimately the level of risk attached to a merchant.

Merchants always have the option of opting for a merchant credit card account provider rather than going for a bank. Merchant account providers like Instabill not only offer merchant accounts with a competitive fee structure and cost effective e-commerce solutions, we’ll find an acquiring banking partner to take them on contingent on solid history.

Many merchant credit card account providers will also provide various other accounts like offshore merchant accounts, third party merchant accounts and high risk merchant accounts etc. Documentation proving your business ownership and other details are generally required and some companies also provide approval for merchant credit card account in less than 5 days at low rates.

Fee structure varies from company to company, but you can expect:

  • Merchant Credit Card Account Start up/Set up Fee – from $100 to $500, usually depending on business type
  • Statement Fee – $5 to $40
  • Transaction Fees – 10 to 75 cents, usually made per sale
  • Discount Rate – generally between 1% to 6% depending on volume sales
  • Chargeback Fees – Made per refund, between $20 to $50

Most banks tend to have a diverse criterion for merchant credit card accounts. For new businesses, however, providing documents and details might not be such an easy task. Also, businesses with high volume sales potential will end up getting rejected as they would have a higher liability for fraud and most banks do not like taking such risks. That is why most banks are wary of offering services to high risk businesses.