Avoiding Problems with Your Merchant Account

Avoiding Problems with Your Merchant Account

A merchant account is a great investment for small businesses. There are many benefits to having a merchant account, such as accessing credit cards and lines of credit that your business can use to purchase inventory, supplies, or equipment. You don’t want to compromise your merchant account’s ability to pay its bills on time or charge fees that are more expensive than it’s worth. There are ways you can protect your business’s reputation with the institution that provides the service. 

Do not delay opening your merchant account 

Setting up merchant accounts early is better than waiting to establish your business. A merchant account approval is more likely if you are a veteran businessperson and have past success with other vendors. 

These are guidelines, not mandates. If you establish a relationship with your bank, you will be able to get better deals when it comes time for your merchant account. 

Separate your business and personal accounts. 

Your merchant service will try to determine whether you are using your business account for personal or business purposes. This is not only illegal, but common. It can also put at risk both your business and merchant accounts if discovered by either lender. Most institutions will require that any money owed to them be paid before they release funds. This would mean that there wouldn’t be any money available for payroll or inventory expenses until all outstanding loans are settled. This is a nightmare situation that can cost you far more than any amount owed. 

Do not ignore the rules and regulations that govern your merchant account. 

Each bank has their own guidelines about what they will or won’t approve. They may close your account if you break these guidelines. Worse, they might not allow you to return to their system. Lenders approve you because they believe you are less likely to default on your payments or become late than applicants who do not meet their expectations. Any indication that you are not meeting their standards or expectations could result in higher fees and rates, as well as losing credit lines for up to six months. The institution is in business to make as much money as you are. They will charge you more if they are able to charge you for your past or present mistakes. 

Your merchant account should not be used for anything other than the processing of credit and debit cards transactions. 

It is against the regulations that govern many merchant accounts to use a credit card for shopping, utility payments, or purchases from other businesses. Customers who get receipts for purchases they don’t make will be annoyed. This could lead to your merchant account being closed again (see item #3). It can also result in lost sales and future earnings potential. 

Do not sign up for every deal offered by any company. 

It doesn’t matter if they claim you will save money by opening merchant accounts with them. You can shop around to find the best rates and fees. The fees are not necessarily more than the annual profit your business makes. Do not be pressured into signing anything unless you are certain the information they provide is correct and complete, particularly statements regarding credit lines that may be available for future use. 

You can’t refuse to return the item or get a refund without providing a reason. 

Customers have the right to expect services and products they pay for to be satisfactory, particularly if they use credit cards that are hard (but not impossible) to reverse. Even though mistakes can happen with good intentions, you should never say no to someone simply because they aren’t who they claim to be online. This is especially true when dealing with international companies, whose leaders might only know the buyer via their e-mail address. 

Do not sign up for anything that isn’t right for your business. 

Complex back-office processing and more complex merchant account applications can slow down sales and profits if you are a clothing retailer that specializes in vintage apparel. People who work with large-scale companies that offer complex credit card processing services for professionals and other large-scale operations are also likely to become overwhelmed by the amount of time it takes to manage it all. They will lose money, not make any, and it won’t be long before they start losing their income. 

A small business owner must understand not just the do’s and don’ts of a merchant bank account, but also the should’ s and shouldn’t. 


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