Merchant Account – Getting Started

There are many things that go on behind the scenes of ecommerce shopping cart software storefronts so that everything runs smoothly. We have already mentioned quite a few of these goings-on in our articles on starting your own business, specially tailored towards home business start up newbies.

If you intend to operate a web store or a few ecommerce shopping cart software storefronts, the main mode of payment for your customers would likely be credit cards. One way to go about receiving funds via credit cards is through a merchant account. As mentioned in an earlier article, you can apply for a merchant account through merchant service providers (MSPs) such as banks or via independent service organizations (ISOs), third party organizations that enable registered merchants to accept charge or credit cards.

However, the application process can be cumbersome at times. In this article, we will examine the requirements necessary for a merchant account application to be given the green light.


You can apply to have your own merchant account at MSPs and ISOs. The main factor that both institutions will consider in an application are the risks involved. Online payment processing is different from traditional credit card processing because there is no physical credit card to scan. There is a risk of fraud on both ends. Most credit card disputes go in favor of the credit card holder for cases involving online transactions. Merchants end up having to shoulder the costs involved including chargeback fees. If there are too many chargebacks, the merchant might find their account suspended.


Banks or MSPs are generally more strict and selective when considering merchant account applications. This is because banks are regarded as more secure and reliable, and all their dealings are regulated. Generally banks will take a good look at your credit rating and weigh the risks before making a decision.

It would help your cause if you have been doing business for at least 2 years, have a good history with the bank and have an excellent credit rating. If you have been bankrupt in the past or have had any late payment issues, it may be possible to have these blemishes removed from your credit history before applying for a merchant account by writing to the credit reporting bureau and explaining to them that those matters have been settled. If however, you are questioned by banks about your credit history, do not lie. Coming clean shows honesty and moving on with business shows that you have improved in terms of money management.

Even if your past credit history requires that you pay a slightly higher fee than the average, it can still be a good idea for you to pay the higher fee to get your merchant account. The potential benefits that a reliable and secure merchant account provides can outweigh the initial investment cost.


You also need to provide the bank with an average order amount as well as an average monthly amount that you expect to transact via the account. Be conservative as the higher the amount you state, the more you will end up paying in tied-up capital. Also note that that you could be required to set aside a certain percentage or a month’s estimated order amount with the bank in order to cover any fraudulent transactions.


Only opt for an ISO if the banks turn you down. There is a reason why ISOs are willing to approve applicants whom banks have turned down — they charge much higher initial and overall fees. ISOs are very flexible because they are not monitored or regulated. However, because of the potentially steeper costs involved, you should only consider ISOs if your applications to banks have been unsuccessful.

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