How to Set up An Internet Merchant Account

Posted by: Henry B. | Mar 20,2008


The other day I went to a frozen yogurt shop, waited on a long line, and found out that the store was cash only.  I had no cash on me.  Man was I surprised, and my daughter disappointed.  The yogurt shop lost a sale.  There’s no reason this should happen.  Online it is even more important to have credit card processing because there is no other way to make payment, short of sending in a check or money order.  Even if setting up a merchant account costs some money, it’ll make more money than it costs.  Because so many people are using credit cards and debit cards online, it is absolutely imperative that any online business be credit card compatible.  

Here’s a complete checklist for setting up a merchant account:

1. Find a merchant account-affiliated bank.  You can’t necessarily walk into any bank and hope to set up an account – you need to be well-established.  If you have a longstanding, and healthy, relationship with your bank they’ll be more willing to open up a merchant account.  
2. If you’re turned down for a business bank account, web-owners should look towards an independent service organization (ISO).  The caveat is that you will have to pay more for the service, but it is a basic pre-requisite for an online business.
3. When setting up an account, you need to inform the bank or ISO of your projected monthly earnings.  
4. The main problem for both banks and ISO’s is fraud – protection against fraudulent purchases that will result in a chargeback.  For example, a thief steals a card and then the true cardholder disputes the charges.  These charges will need to be paid back, resulting in a net loss.  What this means is that both banks and ISO’s will require a sizable amount in the account to make up for fraudulent purchases.
5. Banking out of the way, you need to now concentrate on HTML.  If you’re now looking for a web host, be sure to look for one that includes credit card transaction technology with good security measures.  
6. Set up payment processing software that will communicate between your website and the bank.  Examples are Verisign and Authorize. 

Those are the basics for setting up a merchant account.  When selecting an ISO, you need to factor in the number of fees for each transaction, as these will cut into your profits.  Examples are interchange fees, monthly fees, and chargeback fees.  Also: it’s very important to sign up with a stable and reliable ISO, as some ISO’s have been known to be fraudulent, so keep an eye out.  

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