Questions to Answer When Selecting a Merchant Account Provider

When you’re business is ready to start accepting credit cards, you’ll need a merchant account provider. You can shop around on your own, or you can save time by using a service that sends your requirements to providers who will bid for your business.

Whether you go through the bid request process or shop for a merchant account provider on your own, you will be asked a set of questions. The following questions are ones almost any merchant account provider might ask. Knowing what they are can help you prepare.

Does Your Business Currently Accept Credit Cards?

Scott Healy, vice president of marketing and product management at, says “A business that has been accepting credit cards will have an established history of charge and chargeback volume, which impact the rates the merchant account provider can offer.”

How Do You (or Will You) Receive the Majority of Your Credit Card Processing Orders?

Providers charge different rates for different types of transactions. This is because the risk of fraud varies depending on how credit cards are received or recorded at the point of sale. In-person transactions, authorized by a swipe and a signature, present lower risk and can be processed at a lower rate. By contrast, in e-commerce an estimated $2.8 billion in sales was lost to fraud in 2005. That’s 1.6 percent of all online revenue. So online transactions, as well as those taken by phone and mail, come with a higher rate.

Which Types of Cards Do/Would You Like to Accept?

The types of credit cards you accept help determine the rate, or percentage of each transaction, that you pay. American Express has a higher rate than Visa and MasterCard; Diner’s Club has a slightly lower one. Visa and MasterCard both require you to work through a middleman to get an account; using a service that sends your requirements to merchant account providers to bid on can smooth those connections between all the vendors and agents.

To get an American Express merchant account you can also apply directly to American Express. The Discover Network you to process Visa, MasterCard, Amex, debit cards, and checks, as well as its own Diner’s Club and Discover cards.

What Is (or Will Be) the Value of Your Typical Credit Card Transaction?

In addition to the rate, providers charge a variety of other fees, such as a flat fee per transaction, a minimum monthly fee, and an authorization fee. For a company with small transaction values, high per-transaction fees can severely increase the financial burden, so a lower per-transaction fee is better. For a company with higher average transactions, a lower discount rate might be a more important priority.

What Is Your Current or Projected Monthly Credit Card Processing Volume?

Account providers may set monthly minimums for companies that receive a low overall dollar amount in credit card purchases each month. For example, if your monthly minimum is $25 and your transactions for that month netted the provider only $20, you pay an additional $5 to make up the difference. If you’re not planning a big monthly sales volume (at least not at first), focus on getting a low setup cost and monthly fee. When you can anticipate the decreases in your credit card processing, you’ll want to make sure your account minimum isn’t too high for your downtimes.

Are You Looking to Receive Information on Credit Card Terminals as Well as Merchant Accounts?

Point-of-sale terminals can be yours for less than $300, not including setup fees, though many providers will include a terminal for free. If you’re only handling Internet transactions, you’ll need a payment gateway but not a terminal. If you’re accepting in-person transactions, look for a unit with a printer, which you usually get for the same price. Printers are also handy for paper trails on mail order/telephone order transactions.

When Would You Like This Credit Card Processing Service to Begin?

The merchant account application itself will take up to three days to process, though you can technically begin using it the next day. However, if you need a terminal, the whole process can take up to a couple of weeks. And if you need it for Internet transactions, it may take anywhere from a day to a month to get set up, so plan accordingly.

Are You Interested in Receiving Information on Wireless or Portable Processing Terminals?

Going wireless bumps up the hardware cost significantly, to the $500 to $800 range. But if you do your business on the go, whether it is door-to-door, in a taxi, or at trade shows, wireless is priceless.

What Products and Services Do You Sell and What Additional Credit Card Processing Requirements Might You Have?

If this question sounds intrusive, keep in mind that providers are trying to assess risk. Make sure the provider can accommodate any additional requirements you might have, such as the following:

  • If your company operates at odd hours, check the provider’s tech support availability.
  • Ask potential providers to explain their chargeback procedures. Almost all businesses occasionally encounter chargeback situations, but the fees that providers charge for handling these can be especially painful for companies with a high volume of transaction.
  • If you’re going to be using the account for online transactions, does the provider also have a payment gateway? Will it provide additional software for your Web site, such as a shopping cart, order confirmation, or catalog management?