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Apply for a Merchant Account
Posted on 30 October 2003 04:06 AM

Applying for a merchant account requires submitting an application to a merchant bank for their review. This section explains the supporting documentation required when applying for a merchant account and explains the application process. The specific information in this section relates to requirements for a Humboldt Bank merchant account application. Although other merchant banks will have slightly different requirements, the information here should help you to understand the types of documentation required and the overall application process of all merchant banks.

The bank will require the following to be submitted with your application, depending on your expected monthly charge volume:

  • Less than $5,000 volume per month
    • A voided check. The check must reflect the company name on the application.
    • A copy of your driver's license (or other photo ID).
    • Copies of your web site showing your home page and the products you sell. Your home page should clearly identify your company name or DBA (Doing Business As) name that you have submitted on your application. Your product pages should represent the products you will be accepting credit card payments for and should include pricing.
    • Your refund policy. Typical refund policies are: (1) no refunds, (2) 30-day money back guarantee, (3) returns for exchange only, (4) returns for in-store credit only, etc. It does not matter what your refund policy is, but you must have one. You should make sure your refund policy is also clearly displayed on your web site. It is helpful to include a copy of the web pages that state your refund policy. It is also a wise policy to clearly state your refund policy during each sales transaction before the sale is completed, as well as on each receipt you provide to your customer. Clearly emphasizing your refund policy will go a long way toward avoiding chargebacks.
    • Your three most recent merchant bankcard statements (if you currently have a merchant account).
    • The URL of your web site.

  • $5,000 - $16,999 volume per month
    • All of the above.
    • A site inspection.
    • Good credit or a personal guarantor with good credit.

  • Over $17,000 volume per month
    • All of the above.
    • Current business financials.
    • Two years corporate and personal tax returns.
    • If partnership, partnership agreement.
    • If non-profit, IRS proof of non-profit status.
    • If corporation, Articles of Incorporation.

When the bank has received your application and its supporting documentation, they will assess the following:

  • The Internet credit card risk factors as they relate to your business

  • Your credit history

It will take approximately 48 hours to process your application and provide you with a response. The response the bank provides can take one of three forms: your application may be approved, your application may be denied, or you may receive an offer.

  • If your application is approved: Congratulations! You are now officially an Internet merchant. You should plan to spend some time learning about your new merchant account and how to use it. You will want to read everything the bank has sent you and you may find it helpful to review this tutorial or print it out and include it with your other documentation.

  • If your application is denied: Your setup fees will be refunded (the application fee will be retained). If you applied for your merchant account from RS Marketing, they will assist you in understanding why your application was declined, work with you to determine alternative short-term solutions to accepting credit cards, as well as develop longer-term steps you can take to correct the situation and get into a position that will allow you to have your own merchant account.

  • If you receive an offer: The offer the bank provides will usually include one or more of the following:

    • A modification of the discount and/or transaction fees

    • Establishing a reserve (usually 30%-75%) of the expected monthly volume. This reserve will be built by withholding a percentage (5%-20%) of each transaction until the reserve amount is reached. This reserve is intended to help both you and the bank protect against unforeseen chargeback risks.

    • The payment of an initial deposit to provide an initial reserve.

    • Requiring an additional personal guarantor with good credit.

If you accept the bank's offer, your account will be established.

What happens if you refuse the offer will depend on the merchant account provider you chose to do business with.

If you have applied with RS Marketing, your setup fees will be refunded (the application fee will be retained).

Some (but not all) providers will retain all fees paid if you refuse the offer. It should be noted that the possibility that the bank will extend an offer is one of the reasons why many of the merchant account offers seen on the Internet are advertised claiming that they will provide a refund if your application is denied. In practice, less than 2% of all applications are flatly denied. But many will come back with an offer. If you decline the offer, you might be told that your application has not been declined, but that you have declined the offer and your money may not be refunded. Some companies will retain all fees that have been paid, which can be several hundred dollars. Make sure you have a clear statement of what the provider's refund policy is and under what circumstances refunds will and will not be made!