Processing credit card payments is vital for any business, especially in this digital age. It provides both convenience for customers and credibility for a business.
Setting up a merchant account is an essential step toward accepting card payments. However, this process can be tricky and overwhelming, especially for high-risk businesses or ventures just starting. Companies also often make common mistakes when obtaining a traditional merchant account, which can lead to unfavorable terms or even application rejection.
In this blog from ModPay Solutions, our team will discuss some of the common mistakes, how best to avoid them, and alternative options.
Table of Contents:
Common Mistakes That Businesses Make When Obtaining a Traditional Merchant Account
Failing to Shop Around for the Best Merchant Account Provider
Not Reading the Fine Print
Lack of Transparency
Applying for a Merchant Account Without Preparing Properly
Ignoring The Importance Of PCI Compliance
Zero Cost Merchant Accounts: An Alternative Solution to Traditional Merchant Accounts
Conclusion
People Also Ask:
What is a traditional merchant account?
A merchant account is a type of account that serves as a business bank account. It’s used to process credit card transactions and electronic payments.
Traditionally, businesses can obtain a merchant account from a bank, merchant services provider, or other sales organization.
What does an invalid merchant account mean?
There are several reasons why your business’ merchant account is invalid. These reasons include an incorrect card number, AVS (location) restrictions, an expired card, a lack of funds in the account, or a card that has been blocked due to suspected fraud.
Common Mistakes That Businesses Make When Obtaining a Traditional Merchant Account
Every business needs to be able to accept credit or debit card payments, and this is where a traditional merchant account comes in. However, despite the importance of having one, many businesses still fall prey to common mistakes that lead to difficulties in obtaining a merchant account.
Continue reading to learn more about these mistakes and how to avoid them.
Failing to Shop Around for the Best Merchant Account Provider
One of the most common mistakes businesses make is not shopping around for the best merchant account provider for their unique business needs. Most times, it's merely a lack of research, leading many entrepreneurs to choose the first provider they come across instead of doing their due diligence.
It's essential to understand that each provider varies in terms of fees, terms, and limitations. Taking the time to compare merchant account providers' services helps ensure that you choose one that is an excellent fit for your business.
Not Reading the Fine Print
When you sign up for a merchant account, it's essential to read the agreement before agreeing to anything. Many businesses make the mistake of not reading the fine print or not understanding the terms and conditions of their merchant account.
This can lead to hidden fees, high transaction fees, and even unexpected account closures. Make sure to read the fine print and understand the terms and costs associated with your merchant account before signing up.
Lack of Transparency
When businesses apply for a merchant account, they must disclose their business type and the products and services they offer. Not being transparent about your business can result in delayed or denied applications.
Be upfront and honest with the provider about your business and its operations. It's also important to disclose any potential risks associated with your business upfront. This transparency will help you avoid complications during the merchant account application process.
Even if you're the owner of a high-risk business, being transparent about all aspects of your business will build trust and increase the likelihood of obtaining a merchant account. Remember, some providers specialize in offering merchant accounts specially designed for high-risk ventures, one of which is ModPay Solutions!
Applying for a Merchant Account Without Preparing Properly
Many business owners fail to prepare for the merchant account application process, which can result in the application being rejected.
Before applying, make sure to have the following:
All necessary documentation and information
Financial statements
Tax ID numbers
Incorporation papers
You should also have a solid business plan that outlines the types of transactions your business plans on processing, how much you will be processing, and why you need a merchant account.
Ignoring The Importance Of PCI Compliance
PCI compliance, or Payment Card Industry Data Security Standard, is a set of security standards that all businesses must comply with to protect their customers' credit card information from fraud and breaches. Ignoring the importance of PCI compliance can lead to costly fines or business shutdowns.
Businesses should take the necessary steps to become PCI compliant, such as encrypting data and conducting security scans regularly.
Zero Cost Merchant Accounts: An Alternative Solution to Traditional Merchant Accounts
Unlike traditional merchant accounts that charge monthly fees, application fees, and transaction fees, zero cost merchant accounts do not require any upfront fees or monthly subscription fees. Instead, these merchant accounts allow businesses to pass a small percentage fee to customers for every processed transaction. This method is known as a surcharge.
As a result, zero cost or no fee merchant accounts provide an affordable and reliable option for businesses that may not have the resources to invest in a traditional merchant account. Zero cost merchant accounts are an excellent option for businesses of all sizes, operating in all industries.
Conclusion
In conclusion, obtaining a traditional merchant account is critical for businesses, but it's essential to do it correctly. By avoiding these common mistakes, companies can ensure they get the right account and avoid unnecessary delays, fees, and complications.
So before you apply for a merchant account, it's essential to do your research and pay attention to the fine print. These things will help you obtain a merchant account that meets your business' needs.
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