A merchant account is essential for businesses to accept electronic payments like credit cards, debit cards, and digital wallets. Here’s what you need to know:
- Why You Need It: It ensures faster payments, fraud protection, and access to more customers who prefer non-cash payment methods.
- Key Documents: Prepare your business license, bank statements, financial records, and personal ID for a smooth application process.
- High-Risk Businesses: If you’re in a high-risk industry (e.g., CBD, online gambling), expect stricter requirements, higher fees, and rolling reserves.
- Approval Timeline: Standard applications take a few days to weeks, but missing documents or high-risk factors can delay approval.
- Fees: Typical processing fees range from 1.15% to 3.15% per transaction, but high-risk businesses may pay 3.5% to 15%.
- Compliance: Following PCI DSS standards is critical to avoid penalties and protect customer data.
Once approved, integrate your merchant account with tools like POS systems and e-commerce platforms to streamline operations and improve payment efficiency. Regularly review fees, manage risks, and stay compliant to maintain profitability.
How To Get A Merchant Account (Step-By-Step Application Process)
Required Documents and Prerequisites
Getting your merchant account application approved quickly starts with having all the necessary documents ready to go.
Document Checklist
To verify your business identity and financial stability, you’ll need a few key documents. Here’s what to gather:
- Business Documentation: Your business license proves you’re legally allowed to operate. You’ll also need an Employer Identification Number (EIN) from the IRS for tax purposes. If you’re a sole proprietor, you can use your Social Security Number instead of an EIN.
- Banking Information: Share details of your business bank account, including account and routing numbers, and provide at least three months of bank statements. These statements help providers understand your cash flow.
- Financial Statements: Depending on your business size, you might need profit and loss statements, balance sheets, or tax returns. Newer businesses can often provide projected financials, while established ones should have actual records ready.
- Personal Identification: Business owners must submit a valid ID, like a driver’s license or passport, along with their Social Security Number. This is used for credit checks and identity verification.
- Business Details: Be prepared to explain your industry, business structure (e.g., LLC, corporation, partnership), estimated monthly processing volume, and any previous payment processing experience.
Make sure everything is up-to-date and accurate. Errors or outdated information could delay your approval by weeks.
High-Risk Industry Requirements
If your business is considered high-risk – due to factors like higher chargeback rates or regulatory challenges – you’ll need to provide extra documentation.
High-risk businesses often need to submit:
- Comprehensive Business Plans: These outline your operations and strategies.
- Detailed Financial Statements: Proof of financial stability is crucial.
- Chargeback Mitigation Plans: These show how you’ll handle disputes and reduce chargebacks.
High-risk merchants typically face higher transaction costs – about 1.5% more than standard rates – and providers may hold up to 5% of each transaction in a reserve to cover potential chargebacks. Known as rolling reserves, these funds act as a safety buffer for the provider. While this can tighten your cash flow, it’s often a necessary trade-off for approval.
Andy Roth, a former director at Payline Data, highlights the value of honesty during the application process:
"Communication and transparency are only going to help in these situations".
Being upfront about your business model and any risks improves your chances of approval. Keep in mind that high-risk businesses may face a longer application process, as providers take extra time to review operations, financial history, and risk management plans.
Business Credit Profile Impact
Your credit profile plays a key role in the approval process, but it’s assessed differently than for traditional loans. Both personal and business credit scores are considered, though their importance varies by provider.
- Personal Credit: For small businesses, a personal credit score above 600–630 can boost your approval chances. As Libby James, Co-founder and Director at a merchant services company, explains:
"Your credit history is certainly a consideration in merchant account applications, but it’s not the only factor, nor is it necessarily the most significant one".
- Building Business Credit: Establishing a strong business credit profile can lead to better terms and higher processing limits. Jason Wood, SVP Business Banking Sales Manager at Johnson Financial Group, emphasizes:
"Building a strong business credit profile is crucial for the long-term financial health and growth of any company".
Business credit scores, like those from the Small Business Scoring Service (SBSS), range from 0 to 300, with higher scores indicating less risk. For example, the minimum SBSS score to qualify for a U.S. Small Business Administration (SBA) loan is 155, which serves as a benchmark for creditworthiness.
- Impact on Terms: Poor credit doesn’t automatically disqualify you but could affect your account setup. You might face rolling reserves, delayed fund transfers, or higher fees. Businesses with lower credit scores can improve their chances by using a co-signer or agreeing to temporary conditions like ACH delays.
For sole proprietors, personal credit scores carry more weight since loan decisions often rely on them. Other business structures benefit from separating personal and business credit profiles.
Providers consider a range of factors beyond credit scores, such as your industry, processing history, bank statements, and sales projections. With solid preparation and transparency, even businesses with less-than-perfect credit can secure a merchant account.
Next, we’ll walk you through the steps for completing and submitting your merchant account application.
Merchant Account Setup Steps
With your documents ready from the previous section, you’re now set to tackle the merchant account setup process. This involves three main phases that help determine how quickly you can start processing payments.
Application Preparation
A well-prepared application can make all the difference in how smoothly and quickly your setup progresses. Here’s what you’ll need to do:
- Gather Key Business Details: Have your company name, EIN (or SSN if you’re a sole proprietor), contact information, and your business bank account and routing numbers on hand.
- Estimate Processing Volume: Provide realistic projections for your monthly processing volume. Overestimating could lead to more scrutiny, while underestimating might restrict your ability to process payments later.
- Organize Documents Based on Business Type: Standard businesses need incorporation papers, recent bank statements, and financial records. E-commerce businesses should include proof of PCI compliance, while startups may need a business plan outlining revenue projections.
- Confirm Ownership Details: Ensure all stakeholders with more than 25% ownership provide their documentation and signatures.
- Understand Fees and Contract Terms: Reviewing processing fees and contract terms in advance can help you avoid surprises and may even give you an edge during negotiations.
Accuracy is non-negotiable. Payment processors prioritize complete and correct information over guesses or assumptions.
Application and Underwriting Process
The underwriting stage is where payment processors dig deep to assess your business risk. This goes beyond a simple credit check.
- Submit Your Application: Once submitted, your application undergoes a thorough review. As NMI explains:
"Merchant underwriting is one of the most crucial tasks in the payments space; it helps ensure that your merchants are legitimately identified, of proper financial condition, and conform with your risk policies".
- Risk Evaluation: Underwriters consider various factors, including your business structure, financial health, industry type, history, credit data, products or services offered, expected transaction volume, and chargeback history. This process protects both the processor and your business from potential financial risks.
- Extra Scrutiny for High-Risk Industries: If your business operates in a high-risk industry, be prepared for additional evaluations and possibly more documentation requests. High-risk businesses are often flagged due to higher fraud or chargeback rates.
- Chargeback Monitoring: If your business has a history of chargebacks exceeding 1%, expect closer scrutiny. A documented chargeback management plan can help mitigate concerns.
- Technology-Assisted Reviews: Many providers now use advanced analytics to speed up reviews for straightforward applications while identifying potential risks.
To improve your chances of approval, be transparent about your financial history, provide accurate documentation, and clearly outline your expected transaction volume.
Approval Timeline
Once your application passes underwriting, the focus shifts to how quickly you can get approved. Timelines can vary based on your business profile, industry, and how complete your application is.
- Typical Approval Times: Standard approvals can take anywhere from a few days to several weeks. The complexity of your business and its risk profile often dictate the timeline.
- Faster Approvals: Some providers offer expedited approvals for low-risk businesses. For example, MerchantWorld provides same-day approvals for qualifying merchants. This option can be especially useful for businesses needing quick access to payment processing for seasonal sales, new product launches, or immediate cash flow needs.
- Common Delays: Missing information, documentation errors, and high-risk profiles are frequent causes of delays. Submitting a complete and accurate application upfront can help you avoid these setbacks.
- Speeding Things Up: Respond promptly to any requests for additional documentation or clarification. Partnering with an experienced provider can also help streamline the process and minimize delays.
If you know you’ll need to start accepting payments soon, don’t wait until the last minute. Allowing extra time for potential hiccups ensures you’ll be ready to launch your payment processing without unnecessary stress.
Features and Integration Options
Once your merchant account is approved, the next step is to make the most of its advanced features to streamline your operations. These features are designed to improve payment processes and integrate smoothly with your existing business tools.
Core Merchant Account Features
Merchant accounts today are much more than simple credit card processors – they’re robust ecosystems designed to handle various payment methods and business functions simultaneously.
- Payment Processing Capabilities: At the heart of every merchant account is the ability to accept payments through credit cards, debit cards, and mobile wallets like Apple Pay and Android Pay. A secure payment gateway encrypts transaction data to protect sensitive information.
- Point-of-Sale (POS) Systems: Modern POS systems go beyond payments, offering tools for inventory management, employee oversight, and customer engagement. EMV chip readers ensure secure transactions that meet industry standards.
- Cloud-Based Receipt Systems: These eliminate the need for paper receipts, offering digital alternatives that reduce costs and appeal to eco-conscious customers.
- Real-Time Transaction Processing: Payments are authorized and settled instantly, ensuring fast and efficient operations. Security measures, such as PCI DSS compliance, add an extra layer of safety.
Business Tool Integration
The real strength of these features lies in their ability to integrate seamlessly with your existing business systems, creating efficient workflows and eliminating redundant tasks.
- POS System Integrations: These connect payment processing with inventory management, accounting, and customer relationship tools.
"The interaction between physical and digital should feel like a natural part of your customer experience. To do that, you need your systems to speak the same language. That’s why we use Shopify POS."
– Juliana Di Simone, Partner and Director, tokyobike
MerchantWorld’s Clover POS systems are a prime example of this approach. The Clover Station Pro, priced at $54.95 per month, offers a complete management solution with tools like a touch screen, cash drawer, barcode scanner, and customer display. It handles everything from payment processing to inventory and employee management.
For businesses that don’t need a full POS overhaul, Valor Standalone Terminals provide dedicated payment processing hardware that integrates with existing systems.
- E-commerce Platform Integration: These tools sync inventory across online and physical locations, streamline orders, and ensure a consistent customer experience. For instance, Epic Mens integrated Webgility in 2025, saving over 80 hours weekly while managing up to 15,000 orders per month with just four team members.
- Restaurant-Specific Integrations: Tailored for food service, these systems combine in-person and online ordering. In 2025, B&B Butchers & Restaurants used Toast POS with Popmenu to process 2,401 online orders, generating over $480,000 in revenue.
Integration costs vary based on the level of complexity. Third-party apps typically range from $10 to $99 per month, while vendor-built integrations cost $0 to $149 monthly. Custom API integrations may require $500–$10,000 upfront, plus ongoing maintenance.
Additional Services
Merchant accounts also offer extra services that can help grow your business and improve customer loyalty.
- Merchant Analytics: These tools turn transaction data into actionable insights, helping you track sales trends, peak hours, and customer behavior. Research shows that 51% of retailers consider customer data from POS systems their most valuable asset.
- Gift and Loyalty Programs: Loyalty programs are proven to boost customer retention. Customers engaged in such programs spend 60% more per transaction and are five times more likely to return.
"Reward your best customers, boost repeat visits, and build long-term relationships with a loyalty program tailored to your business".
MerchantWorld integrates loyalty programs directly with payment systems, allowing automatic tracking of purchases and rewards without extra systems or staff training.
- Cash Discount Programs: These allow businesses to offer discounts for cash payments while maintaining standard pricing for card transactions, helping offset processing fees.
- Online Restaurant Ordering: These systems integrate with your POS to manage digital orders, process payments, and coordinate with kitchen operations for smooth service.
Together, these features create a unified commerce platform. According to EY research, businesses using unified platforms reduce total ownership costs by 22% and implement systems 20% faster compared to those using disconnected tools.
Success lies in understanding how these features work together to support your business model and customer needs. By leveraging these tools, businesses can gain a competitive edge and improve overall efficiency.
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Fees and Risk Management
Navigating fees and managing risks effectively is crucial for maintaining profitability. Understanding how fee structures work and implementing strong risk management strategies can make a big difference in optimizing your merchant account. U.S. merchants collectively spend over $137.83 billion annually on processing fees, so every decision matters when it comes to controlling costs and protecting your bottom line.
Fee Structure Breakdown
Merchant account fees are made up of several components within the payment processing ecosystem. For example, the average credit card processing fee for Mastercard and Visa is 2.35%. A key part of these fees comes from interchange fees, which are set by card networks and cannot be negotiated. These fees vary depending on the type of card and how the transaction is processed:
| Card Network | Fee Range |
|---|---|
| Visa | 1.15% + $0.25 to 3.15% + $0.10 |
| Mastercard | 1.15% + $0.05 to 3.15% + $0.10 |
| American Express | 1.10% + $0.10 to 3.15% + $0.10 |
| Discover | 1.56% + $0.10 to 2.40% + $0.10 |
In addition, assessment fees charged by payment networks are consistent across processors. For most transactions, Visa and Mastercard charge 0.14%, Discover charges 0.13%, and American Express charges 0.165%.
When it comes to payment processing fees, these can vary depending on the pricing model you choose:
- Interchange-plus pricing: Adds a markup to the interchange rate (e.g., 0.40% + $0.08).
- Flat-rate pricing: Charges a fixed rate for every transaction (e.g., 2.60% + $0.15).
- Subscription pricing: Combines a monthly fee (e.g., $99 to $199+) with base transaction costs.
- Tiered pricing: Groups transactions into different fee categories.
Other fees, such as monthly fees, chargeback fees, PCI compliance fees, and gateway fees, also contribute to overall costs. Depending on your payment processor, you may also encounter setup fees, termination fees, or voice authorization fees.
To ease the burden of these costs, MerchantWorld offers a solution with its 0% credit card processing program. This system incorporates processing costs into sales using a cash discount program, allowing businesses to eliminate traditional processing fees while staying competitive.
Risk Management and Reserves
Managing risks is just as important as understanding fees. On average, merchants lose $3.75 for every $1 in chargebacks. With chargebacks increasing by 20% annually, they account for billions of dollars in lost revenue.
To protect against potential losses, reserve requirements are often put in place. These reserves act as a financial buffer and come in three main types:
- Rolling reserves: A percentage of each deposit is held temporarily before being released.
- Capped reserves: A portion of monthly sales is withheld until a fixed amount is reached.
- Up-front reserves: A fixed escrow amount is required based on expected monthly volume.
Preventing chargebacks starts with clear return policies, top-notch customer service, and accurate billing descriptors. Security tools like Address Verification Service (AVS) and CVV checks add extra layers of protection. When chargebacks do occur, submitting strong evidence and tracking metrics can help recover losses.
"By understanding the main triggers like credit card fraud, product issues, processing errors, and subscription mishaps, merchants can implement prevention best practices and tools customized to their risks." – Kevin Boyd, Web Development Manager, Signifyd
Managing reserves effectively requires understanding your agreement terms, keeping detailed financial records, and maintaining open communication with your payment processor.
How Risk Level Affects Fees
Your business’s risk profile plays a direct role in determining processing costs and account terms. High-risk businesses face higher fees due to increased fraud potential, chargebacks, and regulatory challenges. These fees can range from 3–15% of revenue, compared to standard rates of 1.5–2.9%. For high-risk merchant accounts, processing rates typically fall between 3.5% and 6.5%, but some industries face even steeper fees:
- Adult entertainment and online gambling: 8% to 16%
- CBD and firearms merchants: 5% to 9%
Common fees for high-risk businesses include:
- Setup fees: $500–$1,000
- Chargeback fees: $25–$50 per incident
- Monthly fees: $10–$100
- Rolling reserves: 5–10% of monthly processing volume
Several factors influence a business’s risk classification, such as industry type, chargeback ratios, financial stability, and geographic location. Reducing your risk profile can involve implementing fraud prevention tools, creating clear return policies, and providing excellent customer service to minimize disputes. Regularly reviewing rates, consolidating accounts, and negotiating tiered discounts can also help keep costs down.
Staying PCI compliant, monitoring transaction patterns, and notifying your processor of unusual activity can help maintain a strong relationship with your payment provider and avoid account holds or increased reserve demands.
Onboarding and Best Practices
Once your merchant account is approved, the next step is setting up a smooth onboarding process. This step is essential to ensure your payment processing runs efficiently from the start. By following established best practices, you can avoid delays and sidestep compliance issues that could disrupt operations later.
Steps for a Smooth Onboarding
Start by gathering all necessary documents ahead of time. Having items like business licenses, financial statements, bank statements, tax returns, and any industry-specific certifications ready ensures the process moves quickly and demonstrates professionalism to your payment processor.
Be transparent about any potential issues with your payment processor. As Mike Campbell, Chief Credit and Risk Officer at Newtek Merchant Services, advises:
"If there are some potential issues, let’s address them and be upfront about it and we can discuss. Waiting to see if we will find the red flags is not a good way to enter into the relationship".
Train your team on how to handle transactions securely and establish clear communication channels to resolve issues quickly.
When setting up your POS system, make sure it integrates smoothly with your existing tools like inventory management, accounting software, and customer relationship management systems. Ensuring compatibility prevents data silos and keeps daily operations running efficiently.
Before you go live, perform test transactions. Run scenarios using different card types, payment methods, and transaction amounts. This helps uncover and fix any potential issues before they affect your customers.
Compliance and Optimization
After setup, maintaining strict compliance and security standards is crucial for protecting your business and customer data. PCI DSS compliance is a cornerstone of secure payment processing for any business handling credit card information.
The compliance process involves three main steps: assess, remediate, and report. First, audit how you collect and store cardholder data, inventory your IT assets, and identify vulnerabilities. Next, address these vulnerabilities by upgrading security measures or minimizing sensitive data storage. Finally, submit the required compliance reports to your bank or card brands.
To further secure your operations, implement network segmentation to isolate your Cardholder Data Environment (CDE) from other systems. Use tokenization to replace sensitive data with secure tokens and enable Multi-Factor Authentication (MFA) for all administrative access points. Real-time monitoring tools like Security Information and Event Management (SIEM) solutions can help you detect and respond to threats immediately.
Regularly train your team on security protocols to ensure they can recognize and respond to threats like phishing or social engineering attempts. A well-communicated security policy, supported by leadership, reinforces these efforts across the organization.
In your daily operations, include transaction reconciliation and monitoring. Review transaction reports, watch for unusual patterns, and maintain detailed records of payment activities. This not only helps identify discrepancies early but also offers insights for improving your processes.
You can also use analytics to improve performance. Track metrics like transaction success rates, average processing times, and customer payment preferences. These insights can reveal bottlenecks, enhance customer experience, and guide decisions on which payment methods to offer.
For businesses aiming to eliminate processing fees, MerchantWorld offers a 0% credit card processing solution. This program incorporates costs into sales through a compliant cash discount model. Paired with advanced POS systems like Clover Station Pro, this approach ensures efficient payment processing while maintaining compliance and controlling costs.
Finally, stay informed about regulatory updates and evolving industry standards. Conduct regular risk assessments to ensure your business remains aligned with new regulations and prepared for emerging security challenges.
Conclusion
Setting up a merchant account the right way creates a strong base for steady business growth. The strategies discussed here provide a clear path for businesses aiming to improve their payment systems and boost revenue.
Did you know that businesses offering five or more payment options see a 40% increase in sales compared to those offering just one? That’s a significant jump! With 37% of consumers relying on credit cards and 33% using debit cards for online purchases, having a well-structured merchant account isn’t just convenient – it’s a direct driver of revenue growth.
Of course, security and compliance are non-negotiable. Staying up-to-date with PCI DSS standards not only protects your business and customers from potential threats but also helps you avoid hefty penalties. Plus, ensuring your merchant account integrates smoothly with tools like POS systems, inventory software, and accounting platforms can make your operations far more efficient. As Xplor Pay puts it:
"Overall, a merchant account is not just about processing payments; it’s about enabling smarter, more efficient business operations that drive growth" – Xplor Pay.
Optimization doesn’t stop after setup. Regularly tracking transaction success rates, processing speeds, and customer payment trends can reveal valuable insights. For example, the average non-cash transaction is $112, compared to just $22 for cash purchases. That’s a clear indicator of the financial benefits of accepting electronic payments.
For businesses wanting to cut costs even further, programs like MerchantWorld’s 0% credit card processing offer a compliant way to implement cash discount models. Combined with advanced tools and same-day approval processes, these solutions can help maximize profitability without sacrificing efficiency.
FAQs
How can high-risk businesses increase their chances of getting approved for a merchant account?
High-risk businesses can boost their chances of getting a merchant account by taking a few key steps. Start by ensuring all your financial records are up-to-date and accurate. This includes recent bank statements, profit and loss reports, and any other documents that show your business’s financial health.
On top of that, adopting solid risk management practices can make a big difference. Using tools to prevent fraud and strategies to reduce chargebacks can make your business more attractive to payment processors. It’s also smart to work with a provider that specializes in high-risk accounts – they’ll have a better understanding of the unique challenges your business faces.
Lastly, maintaining a solid credit history and having a well-thought-out business plan can go a long way. A clear and professional approach demonstrates to providers that you’re a trustworthy and prepared merchant.
What are the best ways for businesses to lower merchant account fees?
To cut down on merchant account fees, businesses can take a few practical steps. Start by negotiating rates with your payment processor – many providers are open to discussions, especially if you process a high volume of transactions. Regularly reviewing account statements can also help you spot and remove hidden charges that might be sneaking in unnoticed.
Another smart move is to consider Level 2 or Level 3 transactions. These types of transactions often come with lower fees, particularly for B2B payments, as they provide more detailed data to the processor.
Encouraging customers to pay with debit cards instead of credit cards can also help reduce costs, as debit card processing fees are generally lower. Speeding up transaction settlements – ideally within 24 hours – can further cut down on fees. Don’t forget to check that your business is classified under the correct Merchant Category Code (MCC); being misclassified can lead to higher, risk-based fees.
Finally, use tools and strategies to minimize chargebacks and fraud. These issues not only cost money directly but can also lead to higher processing fees over time. Staying on top of your processing terms and regularly reassessing them is the best way to keep your fees in check.
How can I ensure PCI DSS compliance and protect customer data when using a merchant account?
To maintain PCI DSS compliance and protect customer data effectively, businesses need to focus on a few critical practices:
- Frequently assess their PCI compliance scope to pinpoint and address any potential vulnerabilities.
- Utilize strong encryption protocols to secure sensitive data during transactions.
- Deploy firewalls to safeguard internet-facing systems and block unauthorized access.
Beyond these steps, adopting a zero-trust security model, performing regular data privacy audits, and ensuring employees are thoroughly trained in data protection are equally important. These proactive measures not only help meet compliance standards but also strengthen customer confidence in your business.