If you’re planning to directly accept credit cards or debit cards for payment on your ecommerce site, you’re going to need to establish a merchant account. With this in place, those payment methods can be processed so funds can be deposited into your bank account. In addition to processing payments, a merchant account links your business to the payment gateway through which your customers remunerate you for the products you provide.
The Basic Requirements
To set up an ecommerce merchant account, you’ll need to work with a bank capable of processing American Express, Visa, Discover and/or MasterCard payments, or work with an authorized agent affiliated with one. Either way, you’ll be required to sign a contract confirming your assent to the regulations the card issuers have established. Accepting every card can be a costly exercise, so find out which cards your customers are most likely to have before setting up the account. Visa and MasterCard are the most common.
Expect a Background Check
The financial institution will also want to be assured you can be relied upon to do business honestly. Let’s say you’re setting up a small business with which you’ll sell makeup from home. You’ll be required to file an in-depth application with information about your business model and your finances—just to be considered for the account. You could also be required to provide personal information, agree to a credit check and assign your personal guarantee to the account as the owner of the business.
The Fees You’ll Pay
Merchant accounts are usually billed in one of two manners. You can go with a flat fee for each transaction, or you can choose to pay a percentage of your overall sales. Yes, you called it—this can absolutely amount to a chicken or egg situation when you’re just starting out. After all, how can you get a feel for what this looks like until you’ve been in business long enough to see what kind of sales volume your business is doing consistently. For this reason, it’s usually a good idea to align your site with a third-party payment processor first to get an idea of what your monthly revenue stream looks like. By the way, in addition to the basic acceptance fees, you’ll also encounter charges for setup, statements, chargebacks, monthly minimums, cancellation, customer service activities and batch processing fees. If it sounds like a lot, well, it is.
Attributes to Seek
With all of those fees being charged, it becomes really important to evaluate providers before choosing to go with one over another. Among the primary considerations are whether the processor provides everything you’ll need, or if you’ll incur additional fees working with supplemental providers to handle services they don’t fulfill. You’ll also need to evaluate how well suited the provider is for your makeup business. Your provider should also be PCI DSS compliant, so you don’t have to maintain those standards on your own. Their interface should be easy to use and readily accessible. You’ll also need strong customer support from a live person.
Pros & Cons
Accepting card payments directly keep buyers on your site for the entire transaction. This reassures your customers because they won’t be asked to provide financial information to third parties. However merchant accounts can be costly when compared to third-party payment processing. If you’re researching how to set up an ecommerce merchant account, it’s also a good idea to weigh the costs against the potential benefits before you decide.
