Your business is gliding up to a next level and it is expanding like never before. and you are looking for a way of upgrading your payment method. More importantly, you are looking for a secure method of receiving payments. Have you considered receiving your payments through a debit or credit card or thesoutherninstitute.com? Currently, this is the best and most widely used secure method that merchants are using to receive payments. However, if you will opt for this payment method, you will need to apply for a merchant account.
What is merchant account?
A merchant account is a type of bank account which allows business owners (merchants) to receive payments. The payments can be received in multiple ways, but the typical method of receiving payments is via the debit or credit card. Hence, with a merchant account, you will be able to settle payments via your credit or debit card.
Merchant Account – How does it work?
A merchant account is established with the agreement between you and your acquiring bank, the bank where your account is domiciled. Moreover, you will have to contract a third party company, the payment processor, who is also a party to the agreement. The payment processor will be handling all your payment transactions by working with your acquiring bank and you will be able to receive payments via your debit or credit card.
Benefits of Merchant Account
1. Ensuring smoother transactions: With a merchant account, you will be able to accept both debit and debit card payments. This will help to eliminate any frictions in buying and selling products and services as well as increasing customer traffics and improving cash flows.
2. Increasing sales: It has been established that customers tend to spend more when offered a credit or debit card payment option; consequently, as your sales increases.
3. Improved money management: With credit and debit card payments, you will be able to streamline your payments and manage your transactions. In addition, you will be able to avoid bounced checks and handle repeated payments that are associated with recurring services you provide.
4. Increased security: Once you are contracting with a certified payment processor, you will rest assured that your customers’ card data is secure.
Types of Merchant Account
Based on the payment processor viewpoint, merchants can be assigned two types of account:
1. High-risk merchant account
2. Low-risk merchant account
A high-risk merchant account is the type of merchant account in which the business has high-risk factors such as high chargeback or fraud rate, questionable legality, weak bank regulations, bad credit card history etc. Conversely, if a business has very low or no risk factors, the processor handles the account as a low-risk merchant account. Few processors provide high-risk merchant account and those who provide it charge high fees and rates.
How to Apply and Be Approved for Merchant Account
If you will apply and approved a merchant account, you need the following items:
- A legal entity for your business
- Employer Identification Number (EIN)
- Business account
With these three items, you can start processing your application for a merchant account. However, a sole proprietor does not need these items; all the sole proprietor has to do is to open the merchant account under his personal name by using his Social Security Number as his/her tax ID Number.