Merchant Account Application Requirements

Provided your organization is qualified to apply for a US-based merchant processing account and has received an acceptable payment processing proposal, you can commence the application process. There are a number of requirements that need to be met and, to understand why the process is so stringent, you need to understand exactly what is it that you are applying for. A merchant account is a form of line of credit that a merchant processing bank is extending to the applicant. When you accept a transaction, your merchant account bank will "acquire" it, usually at the end of the day, and will automatically deposit the payment amount, after subtracting the interchange fee and its own processing cost, into your checking account. At the same time it will submit a request for payment to your customer's card issuing bank. Your merchant bank will pay you before it gets paid. That is the reason why they have set in place an application process, designed to establish the credit worthiness of both the applicant organization and its principals. Following is a list of requirements that you will have to meet:

• Merchant Account Application. You will provide in this form details about both your business and yourself, including address (business and personal), social security number, tax ID (if applicable), phone numbers, email address, web address, bank account info, etc.
• Personal Guarantee (for-profit businesses only). All new businesses and a great many established ones are required to provide a personal guarantee before establishing payment processing services.
• Articles of Incorporation. Unless your establishment is a sole proprietorship, you will have to provide a proof that it has been legally incorporated.
• Business License. If your business activity is regulated and requires a license, either a federal or a state one, you will need to provide it.
• Business Financial Statements. Unless your organization has been formed recently, you will have to provide its financial statements (typically it is required that you produce financial statements for the two years preceding the application date).
• Personal Financial Statements. Typically requested in place of business financial statements, personal financials might be requested in addition to them. Personal tax returns for the latest two years are typically sufficient.
• Processing Statements. If you are currently processing credit cards and are looking for a new service, you will be asked to produce your three latest processing statements.
• Voided Check. You will need to provide a voided copy of a check for the bank account that you want your money to be deposited into. The check has to have your "Doing Business As" (DBA) name printed on it. If you have not yet received your checks, you will need to provide a signed bank letter stating your account details.

As you see, there are quite a few requirements for applicants to accept credit and debit cards and it is by no means certain that you will be approved. Still, if you provide the needed paperwork and have decent credit history, chance are that you will get your merchant account service.

Merchant Account Qualifications

There are certain requirements that applicants for US-based merchant accounts have to comply with. It is the responsibility of merchant account providers to ensure that all applicants:

• Are legally registered within the US. Applicants for merchant services have to be either incorporated as businesses within the state that they reside in or they have to be registered with the local municipality and obtain a "Doing Business As" (DBA) name. Individuals are not allowed to establish merchant account processing services. Foreign establishments are also excluded from obtaining US-based payment processing accounts.
• Have a physical address and a registered agent within the USA. Applicants for US merchant services need to provide available a contact person within the US and a physical office for the merchant processing bank to inspect.
• Have a bank account with a US bank. The bank account into which the merchant will have his or her funds deposited must be opened with a US bank.

Only if the applicant complies with the above requirements, the merchant account processor will proceed with the application.

eCommerce Merchant Account Rates

ECommerce merchants pay higher processing rates than their retail counterparts. The reason is that card-not-present transactions are more likely to generate customer disputes than card-present ones. Customer disputes, especially if not addressed properly, often lead to chargebacks, which are costly for both the merchant and its payment processing provider. So the premium that card-not-present transactions are charged pays the insurance against possible chargebacks. Following is a list of the components of the eCommerce merchant account processing costs and what we think is a reasonable rate for each one of them:

• Discount rate. Rates for web merchant accounts have fallen substantially over the last few years and you should not be charged more than 2.19% for credit cards and 1.98% for debit cards for consumer types of cards. You should keep in mind that commercial, business, rewards and some other types of cards are charged at a significantly different interchange rate which, as its main component, directly affects the discount rate that you will be offered. When evaluating a pricing proposal, you should be aware of the pricing structure that your prospective merchant account processor is using. There are several types, most of which will give you a flat rate, in one form or another, for all types of credit and debit cards. The problem with these models is that, in order to make money on all transactions, merchant processing banks have to provide a rate that is higher than the highest possible interchange that you are likely to incur. Your best option would probably be the pass-through pricing model which adds your merchant account provider's payment processing costs to the interchange fees, thus ensuring that no transaction is overcharged.
• Transaction fee. Online merchant account users should not pay more than $0.25 per transaction.
• Application and set up fees. You should not pay any set up or application fees!
• Payment gateway fee. Payment processing gateway is the service that will connect your website's shopping cart with your processing bank and will transmit payment information between them. It should be set up for free and the monthly gateway fee should not exceed $15.
• Monthly statement fee. A bank fee that every merchant services provider will charge you. You should not agree to anything higher than $10.
• Support fee. Another monthly fee. You should not pay any such fees.

Make sure to carefully examine the fine print in the merchant processing agreement before signing it and make sure your payment processor does not hide anything from you.

Retail Merchant Account Rates

Merchant account rates are the sum of interchange rates and the processing costs incurred by the merchant bank. Following is a breakdown of retail merchant account processing rates and our suggestions what you should be looking for (or you can just visit our website).

• Discount rate. You should pay no more than 1.69% for credit cards and 1.40% for debit cards. These are the rates for consumer cards which are the most widely used. Various business to business, rewards and other cards often get charged at a higher interchange rate (the base processing rates set by Visa and MasterCard). You need to ask your merchant services provider what pricing structure they are using. The best choice for you will be the pass-through pricing which will ensure that the payment processing costs they add to the interchange fees are the same for all types of cards and you will not get overcharged.
• Transaction fee. You should not agree to anything higher than $0.20 (it will be the same for debit and credit cards).
• Set up fee. You should not pay any set up or application fees!
• Monthly maintenance fee. Every merchant account provider will charge you such a monthly fee, although they might give it different names. You should not be paying more than $10.
• Support fee. Another monthly fee. You should not pay any such fees.

You will also need a payment processing terminal and your merchant account provider will provide you one and configure it to work with their system. You can purchase the terminal from a third party as well. Other than that, be sure to carefully review the whole merchant processing agreement for charges that may make it more expensive than it seems.

Merchant Account Providers

Merchant account providers like UniBul enable businesses to accept credit and debit cards for payment. Whether an organization accepts cards in a card-present or in a card-not-present environment, they need a merchant account to do that.

In order for a company to become a provider of merchant account services, it first has to be authorized by the Credit Card Associations of Visa and MasterCard. The process involves a check of the credit worthiness of both the business and its principals, a review of the applicant's business and marketing plans and the payment of the registration fees which are $5,000 for each Association. Although banks, that are members of Visa and MasterCard, can and do provide merchant processing services, more typically they outsource this responsibility to third parties. By doing so, they become sponsors of these third parties in their applications with Visa and MasterCard. Merchant account processors are known as Independent Sales Organizations ISO) when they are registered with Visa and as Member Service Providers (MSP) when they are registered with MasterCard. Businesses apply for both registrations at the same time, through their sponsor bank. Upon approval of the application, the sponsor bank becomes an acquiring bank for the ISO/MSP. This means that it acquires the sales receipts that the merchants, using its payment processing services, generate and it is then responsible for paying the merchant the transaction amounts, minus its processing costs and the interchange fees. In the mean time the merchant processing bank submits a payment request, through Visa or MasterCard, to the bank that issued the card used in the particular transaction. ISOs and MSPs are obligated to display the name(s) of their acquiring bank(s) on every page of their website and other promotional materials. Usually this sign is placed in the footer of the website.

Once registered, ISOs and MSPs can sign up sales agents to source merchants for them. The sales agents, however, cannot advertise themselves as providers of merchant account processing services. They are only authorized to represent the ISO/MSP and must identify themselves as agents to these companies.