Where Can I Obtain a Merchant Account?

Merchant accounts are traditionally obtained through a bank that issues merchant accounts called an “acquiring bank” or “acquirer”. Generally, there is a separate group within the bank that processes merchant account applications.

When you apply for a merchant account, there is no guarantee that your application will be accepted. The merchant account risk group will assess a number of factors before approving your application, including (but not limited to):

Your company and/or personal credit history

The type of product/service you are selling (note that it is extremely difficult to obtain merchant accounts for certain types of “high risk” products and services such as online gambling, pornography, outbound telephone sales, prepaid phone cards, travel agencies and others. What is perceived as high risk varies by acquirer). Falsifying the nature of the product or service you are selling when applying for a merchant account could lead to termination of your merchant account.

Estimated dollar volume, Average order size

A good place to start is with your existing bank, since you already have a relationship with them. You may also choose to inquire about merchant accounts with other banks to compare rates and policies (in fact, we strongly recommend this). It is possible to have a merchant account with an acquiring bank that is different from the one where you have your bank account, although they may encourage you to move your bank account if you obtain a merchant account from them. It is likely that you will need to open a bank account with your acquiring bank so that funds can be deposited there. In Canada, you may need to apply to more than one bank for a merchant account, since each chartered bank is only allowed to offer one of either VISA or MasterCard. Some partnerships between bank merchant account groups have been formed to reduce this administrative annoyance.

Note that American Express and Discover are their own acquiring banks, so if you want to accept either of these cards, you will typically complete a merchant account application directly with them. To obtain a US currency American Express merchant account, you must have a physical US address (presence) or they will not process your application.

Your business location can be a determinant of your ability to obtain a merchant account in a specific currency. International companies without a Canadian or US presence will find it difficult or impossible to obtain a merchant account through a traditional bank in either the US or Canada. They may need to use the services of specialized ISO’s, described below. Canadian merchants wishing to process in US currency have several options, since several banks in Canada offer US currency merchant account options, and some banks in the US (typically with affiliations to Canadian banks) will offer US currency merchant accounts to merchants in Canada. US businesses wishing to process in Canadian currency typically have a more limited range of options for securing a merchant account.

Another option for obtaining merchant accounts is through a credit card broker or “ISO” (Independent Sales Organization). These companies have relationships with many banks, and attempt to match your credit history and type of business with a bank that will accept your application. They are typically paid a commission from the acquiring bank for your business, and this is passed on to you in the form of a set-up fee or a percentage of sale fee. There are many ISO’s to choose from. Be aware that not all of them are reputable, so you would be well-advised to do some research on them before “signing on the dotted line”. We typically recommend that merchants obtain their merchant account through a bank if possible, since the rates are typically lower, and they are unlikely to go out of business. That said, many reputable ISO’s do exist and provide a valuable service to merchants that are unable to get a merchant account through other channels.

When you start the process of investigating merchant account options, we recommend strongly that you shop around so that you can compare rates and service levels. The merchant account business is highly competitive, and it is not uncommon for rates to vary even within acquiring banks, depending upon which merchant account representative you speak with, and how valuable they perceive your business. Having said that, price should not be your sole factor in obtaining a merchant account. Service is important too. Understand the acquiring bank’s policies with respect to such factors as charge-backs (when a customer refuses to pay a charge). You may wish to reevaluate your merchant account provider if, for example, their policy is to revoke your merchant account status after a small number of charge-backs.

Finally, if you are using a payment gateway such as Skipjack, make sure that your acquiring bank connects to a payment processor that your payment gateway also connects to. In the case of Skipjack, this would include First Data Merchant Services, Global Payments, Vital, NOVA, First Tennessee and UPP (Global Payments is most commonly used in Canada).

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