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6 Steps in Applying for a Merchant Account

Posted by Alex Neir on Wed, January 18, 2012 @ 02:09 PM
Applying for a Merchant Account

Are you considering applying for a merchant account? If the answer is yes then this post is for you. I will explain the process and give you specific direction on how to secure the very best rates available.

When applying for a merchant account there is a specific order in which you should approach the process. Below are the 6 steps when applying for a merchant account:

  1. Review the different pricing option available and understand how your business is affected by each
  2. Review some questions to ask when shopping for a merchant account
  3. Shop at least 3 different providers
  4. What to expect with the merchant account application
  5. What will be required for merchant account support documents
  6. Generally, how long do it take to set up a merchant account

A detailed understanding of the different merchant account pricing structures will help you when speaking to merchant service providers. Some providers will pitch you a pricing model that is more advantageous for them and one that is not the best fit for your business. Additionally, it is important to know how your business transactions affect your costs with respect to frequency and size.

When shopping for a provider it is helpful to know what to ask. We have compiled a set of questions that will get you headed in the right direction.

Always shop at least 3 providers. This will allow you to get a feel for multiple providers and will strengthen your chances of finding a good fit for your business.

Once you decide on a provider the next step is the application. The typical application is quick and easy to fill out. Most providers will gather the requirements on the phone and are able to consult you on ambiguous questions. Important pieces to pay attention to are the merchant account soft limits. You will want to make sure you give your account enough room to grow as the business expamds.

Along with the application you will be required to provide support materials related to the applicant and business applying for the account. A short list of support materials can be found here.

The length of time it takes to get an account set up depends upon your type of business, industry, requested volume and financials. The process can take from 24 hours up to 2 weeks.

If you found this post to be helpful and would like to inquire into and account with Maxx Merchants please give us your contact information and a representative will be in touch shortly.

Tags: Merchant Account Soft Limit, Applying For a Merchant Account, Support Documentation, Merchant Account Pricing

Merchant Account Pricing | What to focus on

Posted by Alex Neir on Fri, January 13, 2012 @ 11:08 AM
Merchant Account Pricing

Merchant account pricing can be confusing in that there are quite a few moving parts that determine the overall cost month to month. This post is intended to explain how merchant account pricing is set up and give your business specific direction when considering alternate pricing plans.

There are three pricing models used to establish merchant account pricing.

  1. Interchange Plus – Transparent pricing in which you are assigned an exact markup over interchange
  2. ERR (Enhanced Rate Recovery) – One advertised rate with disguised downgrades
  3. Tiered Pricing – Multiple tiered prices depending on how credit cards are accepted

Regardless of the pricing model there are two components that make up the majority of your merchant account cost. The percentage of the sale and the per-transaction cost.

Most merchant service providers will have a preferred pricing model which is used to quote merchant account pricing. It is up to the business requesting an account to specify which pricing they prefer. The most cost effective pricing is Interchange Plus.

Specific direction when considering alternate pricing plans

Rule 1 – request interchange plus pricing. If the provider you are speaking with tells you that your business does not qualify for Interchange Plus pricing, look for another provider.

Rule 2 - Understand how your business’s transaction size and frequency affect your merchant account costs. First, determine your average sale amount. Take the total amount of sales for the previous month and divide them by the total transactions. Second determine the total number of transaction you are likely to conduct month or month.

With these two figures you can do a simple calculation to determine where you need to focus when negotiating your rates. If you have a higher average sale amount and lower transactional volume you need to negotiate a lower percentage of sale. If you have a lower average sale amount and I high transactional volume you need to negotiate a lower per transaction price.

For example - If your pricing is 1.59% and $0.25 per transaction:

  • A $1.00 transaction will cost $0.27 or 26.59%
  • A $100.00 transaction will cost $1.84 or 1.84%

Would you like more guidance on how to negotiate your merchant service pricing? Download our guide on questions to ask when looking for a merchant account.

Tags: ERR Pricing, Tiered Pricing, Interchange Plus Pricing, Merchant Account Pricing