Business Ideas

Now that you've decided to start accepting credit and debit cards from your customers, you'll need to obtain a merchant account. This process takes anywhere from 3-5 days but there are some requirements to meet as part of this process. Keep in mind that a merchant account is in essence, a line of credit to and for your business. The merchant account vendor allows you to sell your products and services while the customer's payment is being transferred from their issuing bank to yours.

Because a merchant account acts like a line of credit you will need to have - you guessed it - a credit check conducted. As the business owner and principal, the merchant account provider looks at your credit and assesses risk based on your history. Your creditworthiness will obviously affect your ability to obtain an account and whether or not there are any stipulations on the use of the account. Individuals with poor credit will likely be denied while individuals with marginal credit will have to pay additional fees or rates.

A few reasons why you may be turned down due to poor credit include having an account in active collections, active tax liens, unacceptable business types, monthly volume not matching average ticket and showing up on the Member Alert to Control High-Risk (Merchants) list (MATCH). Merchant account vendors will check each of these as part of their risk assessment before determining your creditworthiness.

If you're credit rating is good or great, that should give you some leverage when shopping around for the best rates. However, if your credit rating is borderline, you do have options to get approval but it may cost you additional time or money. Once you are approved, your personal credit rating will no longer be considered nor affect the rates or fees on your account. In fact, a negative personal credit rating will not cause you to lose an account already in place.

If during the application process you run into a problem due to a marginal or poor credit score, there are some options you have to obtain the account. Perhaps you can have a co-signer with a higher credit rating help you obtain the account? Another option would be to accept an Automatic Clearing House (ACH) delay on the account. This is actually typical for new accounts and allows your business to gain credibility with the merchant account after a period of time processing your transactions. One final option would be to submit to a rolling reserve delay in which the processor withholds a pre-specified percentage of the gross sales until processing credibility is established.

Although VISA and MasterCard are the two most common cards, you will likely be asked whether or not you want to accept American Express and Discover Card as part of the application. Both companies charge higher rates and fees but both cards are worth accepting since most businesses cannot afford to lose customers. Both Discover and AMEX don't charge a setup fee and Discover does not charge a monthly statement fee.

The whole process takes several days to obtain approval. Expect 3-5 days as the processor runs through preliminary checks. If your personal credit is marginal, it will likely take longer as they evaluate other risks associated with your business. If your new business is relying on the holidays, be sure to plan ahead as this is a hectic time for merchant account vendors to process applications. Be patient and remember, there are options should you be denied.