Getting a Merchant Account

First, you’ll need a merchant account, which is where credit card payments will be deposited. To get a merchant account, you have three options: you can use a bank, a third-party provider like PayPal, or an independent sales organization. The question of which option is best for your business depends on your sales volume, among other factors. In general, businesses with low sales volumes will pay the least with a third-party provider because of the absence of monthly fees, but this arrangement also results in the longest waiting times to actually receive the funds. In contrast, businesses with higher sales volumes will pay the least with a bank or independent sales organization as the discount percentages per transaction are lower than those offered by third party processing companies.

It is important to note, however, that getting approval for a merchant account directly through a bank can be difficult, if not impossible, as many banks refrain from providing credit card processing capability to new or even established home-based businesses, particularly for online businesses that lack a brick-and-mortar counterpart. Consequently, most home-based business owners are best suited by working with an independent sales organization, affiliated with acquiring banks that encourage business relationships with home-based merchants, even with those who have a less-than-perfect credit history. (Many independent sales organizations allow merchants who do not have a favorable credit score to use a cosigner who possesses better credit.)

Another advantage of working through a bank or independent sales organization is that, in essence, your home-based business owns its own merchant account. The advantage of this is that when customers receive their credit card statements, your company’s name will appear beside the purchase amount. In contrast, if you work with a third-party provider, the name of that provider will appear on the statement. Customers are less likely to recognize the third-party provider’s name, and consequently often initiate chargebacks – an expensive, losing proposition for your business.

Establishing an alliance with a bank or independent sales organization offers this additional benefit: Processing limits are more generous. Many third-party processing companies place a lower cap on the monthly volume and highest ticket amount. As your business evolves and grows, you should anticipate a higher transaction volume. Lower processing limits can preclude you from accepting credit cards over a certain threshold level, constraining your business’s growth and cash flow.

In almost all cases, working through an independent sales organization is the best way to get a merchant account and be able to accept credit cards for home-based businesses, but this will depend on your specific circumstances. Many merchant account providers have special packages for home-based businesses, so take the time to shop around for the best deal.