So Many Banks, So Little Time: Choosing A Merchant Account Provider

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Piggy bankThe selection of merchant account providers available to merchants these days is mind boggling. To help you sort through the pile, I’m going to list some examples of merchant banks as well as discuss the process of choosing a merchant account provider, including questions you should ask prior to selecting your merchant processor.

Things To Look For In A Merchant Account Provider

Each merchant bank has a different fee structure, which generally includes monthly and transaction fees. While merchant banks with low fees are attractive, they are not necessarily the best. Ask for a sample contract and compare the terms and rates among those offered by different merchant banks – this will give you negotiating power. Here are some things to look for in a merchant account provider:

Fee Structure

  • Discount Fees : These are charged as a percentage of your sale, and should not exceed 2.25% and $0.30 per transaction. Keep in mind that these fees may differ for different types of credit cards (ie. Visa, MasterCard, etc.).
  • Monthly Minimums : There should be no monthly minimum.
  • Monthly Statement Fees : A monthly statement fee should not exceed $25.

Turnaround Time

  • Deposits to Your Account : The time between a sale and deposit of proceeds in your bank account should not exceed 72 hours. This turnaround time is typically best when your merchant account is provided by your business bank.

Customer Service

A typical merchant account application will ask that the following are in place:

  • The domain is registered to the account holder.
  • An SSL (security) certificate is in place.
  • They may ask for a copy of the homepage and one or two product pages.

Favorable Terms

  • Length of contract – especially if you are new to the business, you do not want to get locked in to terms that you later discover are unfavorable.
  • Bank reputation – Customer service and support, hours of operation, length of time in business, and alternative payment processing options in the event of a system failure are all factors that determine a merchant bank’s reputation.

Where To Look For Your Merchant Account Provider

Here is a short list of places to begin your search for a reliable merchant bank:

  • Your own bank – ie. where you have your business banking account. This is often a convenient option since you are already doing business with them and are familiar with their quality of service. Also, the turnover time between the transaction and the day your money is deposited into your account is typically at a minimum since your business account and merchant account are hosted by the same entity.
  • Business and trade associations – associations in your industry will often have negotiated discounted merchant processing rates.
  • Referrals – check with your colleagues and co-workers, maybe even your competitors, and see who they use.

Examples Of Merchant Account Providers

What Other Questions Can We Help You With?

About The Author:

Alex has been involved on the business side of the internet since the early 2000's. He holds both a Management Science degree from the University of California at San Diego as well as a Computer Science degree from NJIT.

We Rock Your Web had its roots back in 2004 as the tech blog for a web design and development company Alex founded that has grown and evolved into the parent company of We Rock Your Web.

While his foundation is rooted in web development, his expertise today lies in content and digital marketing, SEO, organic and paid search, analytics, and publishing. Alex is an avid tennis player, nature enthusiast, and hiker, and enjoys spending time with his wife, friends, and dogs.

Disclaimer: This website contains reviews, opinions and information regarding products and services manufactured or provided by third parties. We are not responsible in any way for such products and services, and nothing contained here should be construed as a guarantee of the functionality, utility, safety or reliability of any product or services reviewed or discussed. Please follow the directions provided by the manufacturer or service provider when using any product or service reviewed or discussed on this website.

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May 9, 2012 6:12 am

In this age of identity theft and frequent hacking attempts, security likely has a place at the front of your mind. Online stores need to be as safe as possible so you can build trust with customer and prevent malware or hacking disasters. When you use a merchant account, the vendor will supply some security on the account end of the process. But the payment gateway and your customer information are entirely in your hands. This means you must purchase security software yourself and building web architecture designed to secure personal information, such as a digital wallet system or of the many other options available. This bumps up the expense and skill required on your development side.

On the other hand, PayPal will take care of nearly all your security concerns…with PayPal security. PayPal is far from foolproof or thief proof and the payment service originally started by eBay has a spotty security track record to prove it. However, if you are low on capital already, the security PayPal gives you is far, far better than no security at all.

Price: Oh yes, you have to pay, at least for a merchant account. Prices vary based on your agreement and how many credit card processing options you want from the vendor. Application fees can stretch into the hundreds of dollars, with a monthly fee and a transaction fee piled onto your long-term costs. Paying three to five percent of your online sales in merchant account fees is very common. This can provide a big blow to your budget and may limit you to PayPal, especially during the first period of operation for a new business.

PayPal wins this round with no upfront costs and only minimal transaction costs, making it a highly affordable option if you have yet to build web architecture around any other option.

Flexibility / Internationality: A merchant account may be necessary for international sales, because, PayPal is simply not accepted as a payment method outside of the U.S. and sometimes the U.K. (although this may change in future evolution of the industry). Since online sales can come from all kinds of countries, skipping out on merchant accounts might not be an option, especially if you are expecting a high amount of interest in emerging markets like India and Brazil.

PayPal offers payment options only through payment. This means you will not be able to give domestic customers the option to pay with a credit card directly, only with their PayPal account. This can also lose you business in the long run. Shipping can also be tricky with PayPal, since its shipping cost systems have been plagued by uncertainty in past years

Customization: Because so much web development is left in your hands with a merchant account, it offers a high degree of customization. In other words, you can offer discounts, put specific items on sale through private deal codes, and other handy tricks. PayPal does not support these functions.

April 30, 2012 5:14 am

Merchant Account

Sometime during your strategic enterprise work you have probably come across the concept of merchant accounts. Put simply, a merchant account allows you to process payments directly on your website. Your customers use an online system to submit credit card information, but behind the scenes a bank has created an account to deposit all the online revenue into as products are bought.

When you enter into a merchant account agreement, your payment system had two separate, integral parts. The first is the processing of the payment, which your merchant account vendor provides along with the account. The second is a payment gateway, the web architecture that frames the payment system, collecting financial information from the user and making sure the order goes through your inventory management system correctly. The merchant account itself cannot offer any of these payment gateway services, that choice is entirely up to you and your web development strategy.

You can enter into a merchant account with more than one financial organization, but one is most common, especially for small businesses that only need to offer a few payment options for domestic buyers. A myriad of banks and businesses offer merchant account agreements, including American Express,, Chase, Paynet, and Merchant Accounts Express. Credit card processing is common with all these companies, but what cards they offer support for may vary.


PayPal is sometimes considered a merchant account service itself, but it is really a separate and entirely external payment system you can use for your online store. When customers choose to pay through PayPal, they are spirited away to the PayPal website itself where they enter their own PayPal information and use funds in that account. PayPal then processes the payment to you, specifically to your own PayPal account.

This is also a simplified definition. PayPal has a number of “payment processing solutions” such as Website Payments Standard, Express Checkout, Virtual Terminal, and Website Payments Pro. These vary in complexity and options based on what type of services you need (such as invoicing) and what kind of payment options you want to offer employees.

April 29, 2012 6:57 am

Isn’t Paypal as good as merchant accounts?

For all that time you spend tweaking your online products and shifting the colors on your website home page to cast your business in the best light, you also need to spend some time on the basics. Customers need a way to pay, and it is up to you to find an easy, dependable payment service.

I know a lot of online vendors use Paypal, but I know a lot of the bigger and more successful companies use merchant accounts, so I often wonder what the benefits of each one are over the other. I think in some ways merchant accounts might be considered a safer and more traditional approach, but Paypal has earned a lot of respect over the years. From researching both, I found out some things I did not know.

Ideally, you should do what large online stores do and offer a collection of credit card and billing options along with PayPal. However, the first year of business operations is typically far from ideal, so you may have to make do with what your capital can afford. Analyze your market carefully. If a large portion of your customers probably does not have PayPal, you may want to give in and use a merchant account. Otherwise, start off with PayPal to save money and then expand.

November 26, 2011 11:08 am

Choosing the right merchant account provider is key, depending on the market, it can make or break your business. Some merchant account providers specialize in online transactions, for example. Others don’t like online at all.


Small Business Marketing

July 18, 2011 7:44 am

I can tell you who not to go with as far as merchant account providers are concerned – and that is UBC (United Bank Card). While the service works fine, they simply won’t taking on random fees that I have to call to have removed (and some they won’t remove). Makes it barely better than Paypal Pro at the end of the day (although their customer service is probably the worst).

April 10, 2011 1:32 pm

There are many merchant services that provides easier transactions for business purposes! As a customer you should ask the provider what kind of options you need based on your business requirements, annual sales volume, etc.

May 8, 2011 6:15 pm

You should choose a merchant services provider with flexible terms! This way you can share your earnings on each credit card transaction.

April 27, 2011 4:14 pm

You should pick your merchant services provider wisely! They need to be affiliated with major credit card providers like Visa and Mastercard.

January 15, 2010 3:05 pm

A couple other tips if you are planning to accept credit cards on your website. First, you’ll want to make sure your site is setup fully with the some of the basics to have your merchant account application accepted by payment processors. I’ll share a short article I found helpful on this same subject.

December 16, 2009 9:42 am

Merchant Accounts First Data Independent Sales delivers far-reaching credit card processing payment solutions for numerous types of businesses.

November 2, 2009 11:30 am

Merchant account plan rates and associated fees can vary depending upon the provider and services you are needing for your credit card processing. Our rates start as low as 1.59% and are customized to the needs of your business transactions.

October 15, 2009 4:24 pm

Policies are a must for any site privacy policy, refund policy etc, you don’t want to find your self falling short of any laws. The customer is always right.

Secondly in this day and age you need to be vary wary of online fraud, and get yourself a good online payment gateway.

September 25, 2009 1:49 am

No matter which type of business you run, we can provide the merchant services needed to make your company able to start accepting credit cards. We offer a total of four services to ensure every type of business is covered. Our services are offered to the following business models.

April 14, 2009 4:34 am

Most of these people seem to be having a hard time in finding a good merchant account provider. I’ve had good luck with Menexis. Check them out. I’ve been with them for three years.

July 7, 2008 4:53 pm

I will definitely use this information on merchant accounts. I have major difficulties in handling all these financial offers and I cannot make a clear distinction about what’s best for me.

June 26, 2008 5:40 pm

Obviously we don’t lack banking services offers, perhaps that’s why sometimes we find it difficult to make the right decisions for our finances. Your article is a little informative tutorial that’s also very useful. Nevertheless I still think that no fee balance transfers are the best deals we can get.

May 29, 2008 2:06 pm

I think that the discount fees are very important if you plan to sign a long term contract with a merchant account provider. If you have high sales volume, discount fees will outweigh the other fees with time.

March 16, 2008 10:06 pm

I have been involved in the payment processing industry for several years in Canada and I must say you covered just about everything a entrepreneur would want to have on their checklist before choosing a merchant account vendor.

A couple other tips if you are planning accepting credit cards on your website is you will want to make sure your site is set-up fully with the some of the basics to have your merchant account application accepted by payment processors.

You will want to make sure you have the following clearly stated on your site:

– terms of use
– privacy policy
– refund policy
– shipping policy

Also make sure your shopping cart service is SSL secure and approved by your gateway service.

March 21, 2008 8:43 pm

I appreciate the tips, they are all very insightful. Handling your finances is not that easy specially now that times change so fast, it’s very difficult to keep following the advantages and keep avoiding the disadvantages.

April 23, 2009 8:12 pm

Merchant service providers who promise diamond service at a rhinestone price are usually not a good choice. They typically have rolling reserve policies, higher chargeback fees, and other hidden costs. It is a good idea to research many providers and take note of more than just the price. Any additional fees that may be charged for unusual transactions should be compared, and customer service and technical help availability are extremely important.