Credit Card Merchant - How To Open A Credit Card Merchant Account ?

Executive Summary about Credit Card Merchant by Jennifer L Loganathan

In this day and age of electronic commerce, the decision to open a credit card merchant account is relatively undisputed. The actual process of opening an account should begin with the retailer identifying certain key parameters about the retailer trade the credit card merchant requires the merchant account for. The selection of an appropriate vendor for the credit card merchant account should be the first step in the cycle, which is usually followed by an application on a prescribed form. If and when approved, certain information and documentation such as financial statements will need to be furnished to the credit card merchant account provider. One approved, the provider will supply the equipment or in case it is an online credit card merchant account, the retailer’s website will need to embed the credit card merchant account software in the e-commerce website and integrate the shopping card software supplied by the credit card merchant account provider.

Selecting a credit card merchant account provider should take into account the volume and value of proposed transactions, nature of business, history and track record and identification of specific needs, if any apply, of the retailer. The volume of transactions and nature of business proposed to be conducted via the credit card merchant will have a significant bearing on the available options to choose from. For instance, if a retailer expects a high volume of transactions, a credit card merchant for that specific purpose will need to be obtained, which frequently fall in the high risk category. Such high risk businesses may not be able to obtain a merchant account onshore, and may need to opt for an offshore merchant account. The history and track record with a credit card merchant account may come into question in case of a domestic account provider. In case a retailer is unable to meet certain basic requirements, for instance, if a retailer has been in business (online) for less than 2 years, the credit card merchant account provider may ask for a cash bond (as indemnity) along with a business plan, which will further need to be approved.

In addition to choosing between an offshore or onshore provider (which in some cases may not present a choice), an e-tailer will be well advised to do some extensive number crunching when choosing a credit card merchant account provider. Today, there is available, an extensive list of provider to choose from, with varying fees, minimum requirements and transaction fees. While intense competition has caused many providers to lower their fee structures, a credit card merchant must beware of hidden fees and charges that may not be presented initially by providers offering ‘ZERO SETUP FEE!’ and similar catch phrases to capture attention.

The actual application process begins with filling in an online form (in case of internet credit card merchant account) or a physical form, available through your local bank, in the case of a domestic credit card merchant account. Many offshore account providers can be located by simply searching the internet. The application form is then screened by the credit card merchant account provider, in order to assess feasibility, primarily from a risk point of view. As mentioned before, a high risk vendor will probably be out of favor for a domestic provider without the furnishing of a substantial indemnity bond. The provider will then approach the credit card merchant for further documentation. Such documentation will mostly include:

• Registration certificate, incorporation certificate, memorandum and articles of association (in case the retailer is incorporated), partnership deed (in case of partnership) and other organizational material.

• Details about the directors or partners including name, place of domicile (with proof), contact information, etc.

• Identification proof of the directors, managing partners.

• Business plan and financial documentation.

• Full history with a previous merchant account along with detailed information about chargebacks.

In addition to the submitted information, the credit card merchant account provider will typically conduct its own background checks including a credit history and rating verification, as well as a detailed analysis of the retailer’s proposed business model and revenue potential. Assuming that all is satisfactory, the provider will obtain an approval from an acquirer bank that it has a relationship with (many big banks have their own acquirer bank units). Once approved, the retailer will have to purchase a credit card terminal and in many cases, a dedicated telephone line for processing needs. In case an internet credit card merchant account is applied for, the software is the key to operations. While many credit card merchant account providers have their own shopping cart software, they also provide a compatibility list of 3rd party software. Such 3rd party solutions are often favored by retailers due to the usability, features and ease of management.

A final point to be noted in case of an offshore credit card merchant account- while it is possible to go directly offshore, set up and incorporate a company in a foreign land, and do the necessary paperwork yourself, it may be more convenient and practical to approach a third party credit card merchant account provider such as Stradafee, which specialize in providing credit card merchant accounts and have the necessary infrastructure in place to make the whole process even easier.

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This blog post was posted on Wednesday, March 11th, 2009 at 2:29 pm and is filed under Credit Card Merchant. You are able to see any type of responses to this blog post via the RSS 2.0 feed. You can give your responses, or trackback directly from your own blog.