How to Set Up a Merchant Account for Your Online Business - dummies

How to Set Up a Merchant Account for Your Online Business

By Greg Holden

The good news is that getting merchant status is becoming easier for e-commerce enterprises because banks have accepted the notion that businesses don’t have to have a physical storefront to be successful. Getting a merchant account approved, however, still takes a long time, and some hefty fees are involved as well. Banks look more favorably on companies that have a proven track record.

Traditional banks are reliable and experienced, and most are likely to be around for a while. The new web-based companies that specialize in giving online businesses merchant account status welcome new businesses and give you wider options and cost savings, but they’re new; their services may not be as reliable and their future is less certain.

You can find a long list of institutions that provide merchant accounts for online businesses at one of the Yahoo! index pages.

The list is so long that knowing which company to choose is difficult. Consider visiting Wells Fargo Bank. which has been operating online for several years and is well established. The Wells Fargo website provides a good overview of what’s required to obtain a merchant account.

One web-based merchant account company called allows you to set up and process credit card transactions. (The site also accepts PayPal payments.) This company offers a shopping cart and credit card and debit card processing to businesses that accept payments online. chose to use GoEmerchant after an extensive search because it found that the company provides reliable processing, while protecting the business from customers who purchased items fraudulently.

One advantage of using one of the payment options set up by PayPal Payments is that the system (which originated with the well-known companies CyberCash and VeriSign) was well known and well regarded before PayPal acquired it.

In general, your chances of obtaining merchant status are enhanced if you apply to a bank that welcomes Internet businesses, and if you can provide good business records proving that you’re a viable business that makes money.

Be sure to ask about the discount rate that the bank charges for Internet-based transactions before you apply. Compare the rate for online transactions to the rate for conventional “card-swipe” purchases. Most banks and credit card processing companies charge 1 to 2 extra percentage points for online sales.

Do you use an accounting program, such as QuickBooks or MYOB Accounting? The manufacturers of these programs enable their users to become credit card merchants through their websites.