What Is a Merchant Account for Small Businesses?
Payments are a difficult area of business to get to grips with, particularly when youre in the early stages of starting a company. After youve set up a business bank account, its a good idea to set up a merchant account as well. Because otherwise, you may not be able to receive payment by credit or debit card. Find out everything you need to know with our guide to setting up a merchant account for small business owners. A merchant account is an account into which funds from debit and credit card purchases are transferred after they have been processed. Its a very important part of the payments process, along with payment gateways and payment processors. While you own the account, you wont have direct access to it. Instead, the funds in your merchant account are automatically transferred to your business banking account in 1-2 business days. Its simple. Without a merchant account, you wont be able to receive payment from your customers via credit card or debit card. Thats a serious issue, as American consumers are frequent credit card users. As a small business owner, you should try to accept as many forms of payment as possible. If you only accept cash, you could end up turning away potential customers. With a merchant account, youll be able to accept online credit and debit card transactions as well as in-house card payments. Plus, merchant accounts offer additional features that can help you get started when running a small business, such as check processing services or online reporting features. In addition, there are merchant accounts that offer services to ensure your account remains PCI DSS compliant, helping you keep your customers transaction data safe and secure. How to set up a merchant account for small businesses  It is not difficult to open a merchant account, but be sure to do your research into who is the best provider for your small business. Each provider will have their own features, pricing schedules, and contract terms. Make sure you pay attention to how much you will be charged, and compare the services offered by different providers. Once youve chosen your provider, its time to actually create your merchant account. You will need to provide your business name, contact information, and tax information, as well as your routing and account numbers for the business bank account where you want to accept your deposits. After youve signed up for a merchant account, you can start using it to take payment by credit and debit card. Heres a step-by-step guide to what you can expect:  Taking payment  For in-house payments, youll need to use a card reader, which are generally provided by your payment processor. If youre selling online, customers will simply need to submit their card details. Processing payment  After payment has been accepted, the customers card details are sent from the card reader to the payment gateway, before they are forwarded onto the payment processor. Then, the information is sent to the card network before its forwarded to the customers bank. Assuming sufficient funds are contained in the account, the transaction is authorised and a confirmation is sent back to the card reader. Receiving payment  This is where the merchant account comes in. The customers bank will deposit the funds here, where theyll wait before being sent to your business bank account. Theres usually a downtime of around 24 hours to seven days (known as the settlement period). Opening an international merchant account  If your small business has one eye on global expansion, you may want to consider opening an international merchant account. This will allow you to accept credit and debit card payments from customers around the world. International merchant accounts are a great way to expand your business, as you can open them in any region you want to break into. We can help  GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments. Take a look at our guide to managing expenses for small businesses