How to get merchant account to start home-based business?

[Twinhead]

I am planning to start a home-based business. I probably need to apply for a merchant account to take credit card. I have no idea about merchant account. Anyone can help? And for the home-based business, anything I should do before I start the business? Thanks for every comments.

 

[tcsenter]

Find a merchant services or card services provider. Do a search for 'merchant account' or 'card services'. You'll get a million hits, but beware, 90% of them are just an unnecessary level of 'middle men' who tack on their fees and charges.

Home based businesses are higher risk so not all merchant services providers will accept accounts for home business. I've warned others to understand exactly what you are getting into and shop around - a lot. Read the fine print, know exactly what the fee structure is. This is not something you can generally have done in a month unless you already know the business like the back of your hand.

If you're only starting to look now, expect to have your merchant account up and running NO SOONER than four months from now, allowing two months or so to learn all about what having a merchant account entails and shopping around for the best merchant services package. Otherwise, if you try to do this on the quick, you'll end up getting screwed over in excessive fees and charges bound to a contract you can't easily get out of.

I'm not trying to scare you out of doing it, I'm just saying, take your time and research. Find a small business/consulting related forum on Yahoo or somewhere, get advice from people who have been where you want to go.

If you don't have the appearance of a legitimate business, forget it. This means a small business checking account, the appropriate sales tax permits and licenses in your state, and a DBA (doing business as) from your county or state. Every merchant services provider I consulted with wanted to physically come to my home and inspect my 'operations'.

This is not as scary as it might sound. All they are looking for is some semblence of a legitimate business infrastructure, such as a home office and dedicated 'space' in your home that you plan to do your business in. It doesn't have to look like a Staples showroom, it can be very simple.

They will want to see ANY evidence of your intended business plan. Trade association journals or magazines, reseller account information, wholesale and distributor catalogs of the merchandise you intend to do trade in, business cards, anything. The more the better. If you don't meet the expectation they want to see, they will tell you what you're lacking.

If you are just looking for payment service provider like Paypal, Bidpay, or C2it, then disregard everything I just said and contact them.

 

[Twinhead]

This is very informative. Thanks tcsenter.
I did do some search on the web. I found this website. It seems pretty reasonable on everything. Maybe you can take a look at it and tell me what you think.

 

[tcsenter]

This is very informative. Thanks tcsenter. I did do some search on the web. I found this website. It seems pretty reasonable on everything. Maybe you can take a look at it and tell me what you think.

Its been more than a few years now since I've had a merchant account and I am really not up to date on the rates, charges, or even changes in the industry, so I'm probably not the best person to be advising you on any particular merchant provider. This business is as filled with smoke and mirrors as it gets and I can give you some general purpose advice.

Charge.com seems like a good "candidate", you should also find several others and compare. What you must look out for is not only the fees and charges they DO tell you about, but the fees and charges they DO NOT tell you about and will not tell you about unless you pry it out of them.

Often, they will only disclose charges or fees which originate from them, not fees and charges which they must pass on to you but do not originate from them, or those you will incur by other institutions their services are processing through.

There is a range of setup and cost options, ranging from high initial setup costs and lower fees, to lower initial setup costs and higher fees. Which is best for you, only you can decide.

Generally, merchant services offered by large and well-known banks such as Wells Fargo and major merchant service providers like Card Services International have a high cost to get started but their recurring/monthly fees are lower and are much more open about disclosure. The rest are those thousand-and-one companies you got hits on when you searched for merchant accounts. These are the companies who, not unlike many internet computer resellers, try to get your attention with an attractive lowball price.

Be wary of the term of any agreement you sign up for. If you aren't prepared to sit down and read and understand the terms and conditions of your agreement before signing no matter how long or confusing it might be, then you're only asking for trouble.

The term of agreement can be as short as month-to-month or it can be as high as three years. If you sign an agreement for a long period of time and you should decide to cancel for any reason before your term of agreement is up, there can be a hefty price to pay for bailing out. The terms of your agreement may also permit them to raise incrementally various fees and charges. This is typical with low-ball merchant service providers who entice you to sign then start raising your fees after a couple months.

Ask about the conditions which might lead to termination of your agreement and merchant account. Excessive charge backs, not meeting the monthly minimum, or exceeding the monthly maximum, may be cause to terminate your account. If you have a merchant account terminated by the provider, it will not be easy to get another. Do not accept vague, evasive, or non-specific answers. You want to see written policies on everything.

Other considerations are "real time" processing vs. batch processing. Real time processing is when each transaction is cleared individually in real time as an order is approved. Batch processing is essentially when you hold transactions then process many of them at one time. The fee for batch transactions is higher, but it may be lower than clearing 50 transactions individually @ .30 cents per transaction.

Also know what their fraud protection measures and polices relating to card fraud. Some of the major card processing services and well-known banks have better protections for you as a business. The rest typically have none and will let you eat the entire loss which you incur as the result of fraud. e.g. Someone places an order with a stolen or invalid credit card, the processing system validates the card and authorizes a capture, so you ship the order. Three days later, they inform you the card or number was stolen. Sorry, you're not only out the cost of the item you shipped, but they may not even refund the transaction and capture fees you paid, either. Sucks to be you.

Terminal and software is another way companies make money from you. I paid $300 for IC Verify terminal emulation software several years ago and IC Verify + Veriphone terminals were the de facto industry standard at the time. I can't say what is the standard today, but you should find out. There are a lot of point of sale systems and software today, not all is compatible with all major banking, processing, and clearing house systems.

Weigh the pros and cons of leasing vs. buying the terminal software and equipment. Some services will insist that you lease their equipment, some will allow you to purchase but only from them at their 200% mark-up.

Again, I cannot stress enough that you take the time to research and understand exactly what you're getting yourself into.