Ecommerce: Getting setup with the right Merchant Account

istock_000017562582smallGetting setup to take payments for your new eCommerce project should be easy. Depending on the type of business you plan to run, you can run in to problems when it comes to processing credit cards.

What is a Merchant Account?

A merchant account is basically a special bank account for holding payments from credit card and debit card transactions. Once a customer makes a payment with their credit card , the funds enter the merchant account ready for transfer to a normal business bank account, usually once per day or once per week depending on transaction volume.

When processing credit cards online , you either need to setup a merchant account with a bank, or you can use an aggregator like Paypal which processes all transaction through their own merchant account on behalf of you.

Setting up a merchant account requires an application and becomes a legal agreement between you and the bank. Not all applications are approved, because the bank could essentially lose money if there was a chargeback and this is where it can become tricky.

Is your business considered high risk?

Although you may not think of your business as high risk, traditional banks may see it this way in regard to processing credit cards online.

This can be for a number of reasons

  • Customers are doing transactions without being present to sign
  • You have a high volume of transactions (Over $20,000 a month)
  • You sell internationally and in foreign currencies
  • You have had a merchant account closed from another provider in the past
  • You have a history of refunds or chargebacks
  • Your industry is considered high risk

Industry type can be a big one. If you operate in any of these industry types below, you will need a company that specializes in high risk merchant accounts. They match you with a particular provider that is used to dealing with that industry but will usually charge higher transaction fees to cover the risk.

  • Adult and Dating
  • MLM Multilevel marketing
  • Online Alcohol Sales
  • Online Firearm Sales
  • Telemarketing
  • Travel & Vacation


There is nothing worse than when sales are going well, business is booming and then your account is put on hold and your funds are frozen. There have been instances with Paypal where funds are simply frozen for months on end without the business being able to withdraw any of their money. If you your merchant account is terminated, you are at risk of being put on the MATCH list, which is like a banned account list that is shared with all the other merchant providers.
It is best to get the correct merchant account for you business type to begin with. Neglecting this can cause a lot of headaches and financial loss further down the track.