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April 15, 2014
by David Goodale

7 Common Misconceptions About Establishing a Merchant Account

Myth #1: Merchant accounts are difficult to get.

When e-commerce was a new concept in the early 2000's it was difficult to get a merchant account if going through a traditional brick and mortar bank. Fortunately, some merchant account providers (such as Merchant were established to make establishing a merchant account easier for online businesses.

The reality is that it is much easier to get a merchant account today than it ever has been. In fact, the requirements in order to establish a merchant account are quite easy to satisfy. Although some businesses choose to incorporate, many of our customers register their business as a sole proprietorship. Then they open a low cost business bank account at their local bank to receive deposits. In most provinces you can register a business name for under $100. That is all that is needed in order to open a merchant account.

Myth #2: Getting a merchant account involves a difficult application process.

The actual process of applying for a merchant account can be easy or difficult depending on the criteria of your business and the provider you choose to be your merchant account provider.

We try to make the application process as easy as possible for our clients by breaking it up into two parts. First you fill in the online application form on our website with basic information about your business. Then we use that information to pre-fill the offline application documents for you and send them to you by email. You just need to print, sign and then email them back to us with a copy of your business registration document and a void cheque so that we can make deposits into your bank account. Some companies like Paypal defer the application until after a business has started processing payments. This can be a bonus in some situations, but detrimental in others. (Learn more about the differences between an aggregator like Paypal and a traditional merchant account provider like The reality is that getting an account is not difficult, and shouldn't involve much more than filling out the application form with your business information and sending in a copy of the business registration and void cheque.

Myth #3: It is expensive to setup and maintain a merchant account.

This is another myth buried in a long distant past when e-commerce was a brand new concept. While that may have been true 12 or 13 years ago, when sponsor banks didn't understand e-commerce, these days it is simply not the case. At Merchant our Starter accounts are free to setup, and have no monthly fees at all. You only pay a low flat rate fee whenever you use the account to process a credit card transaction.

We also provide a merchant account option that does have a setup fee and a monthly fee. This account is meant for large businesses that do a lot of volume on credit cards and want the lowest discount rate possible. Even small businesses can accept payments online with a full merchant account. Whether your business is small or large, cost should not be an issue when it comes to being able to accept credit cards.

Myth #4: Startup businesses cannot be approved.

Startup businesses certainly can be approved. This is one area that very much depends on the sponsor bank and their approach and appetite when it comes to young businesses.

At Merchant our bread and butter are small and mid-sized businesses. We like clients that we can get to know by name. Quite candidly, our success is built on the strength of our relationships with our clients. If you operate a new or young business, the best thing you can do is ask your chosen processor how often they work with startups. Ask for a few references. Almost every large business was a small business at one point in time. One of the best aspects of my jobs is working closely with business owners as they take the journey from startup to established businesses. It's not always a simple journey, and if I'm honest not every client launches a successful business. However, we are there to help as much as possible in the payments department, and if you have a young business we can help you to get an account.

Myth #5:. Canadian businesses have to exchange their USD sales into CAD upon settlement and lose money in the currency exchange process.

As a Canadian business it's often imperative to be able to accept payments in US currency. Some credit card processors may allow you to charge customers in USD, but require you to deposit these funds to your Canadian dollar bank account. This incurs significant FX fees.

The reality is that accepting payments in USD is easy, and as a business owner you should always settle funds directly back in USD to avoid any FX (currency conversion) fees. We can setup accounts to process in USD and deposit the funds directly into your US currency business bank account at a Canadian bank. (This is especially useful for business owners who must pay suppliers in USD since they don't get double dinged on exchange fees.)

Myth #6: It takes a long time to receive the money after accepting a credit card payment.

In the past some credit card processors would send deposits to the merchant on a weekly or bi-weekly basis. This was common place in the early days of e-commerce when the perceived transaction risk was higher.

Nowadays most merchants are on a daily funding schedule. This means that you get paid every business day. Depending on your bank and processor you will typically see funds deposited into your account 48 - 72 hours from the moment the transaction was originally processed.

It's also worth nothing that some merchants actually prefer once per week funding because it is less reconciliation work (less funding to keep track of). At Merchant we give you the choice: you can choose to receive your funds every single day or once per week.

Myth #7:. Payment Card Industry (PCI) compliance is difficult and expensive to establish.

PCI compliance refers to the data security standard that every merchant that accepts credits cards must adhere to. PCI is difficult to explain in a brief paragraph because there are so many different types of merchants out there. For example, you would expect a huge company like Canadian Tire to have more technical requirements than a small local based business. In fact, that is exactly the case. There are four different tiers of PCI compliance, and it can either be extremely involved to achieve (for very large businesses), or it can quite easy (for smaller businesses).

We work with our clients to guide them through the path. Part of our role is to help educate our clients and make sure that their implementation is as smooth and easy as possible. This entails advice such as making sure a merchant does not take credit card details on their own website while maintaining a seamless checkout process, and never storing any card details that you collect (unless you specifically want to for some reason). In short, achieving PCI compliance can be either easy or hard, depending on your strategy of how you go about it. At Merchant, we have the ability to be an integral part of helping you to build that strategy. With our assistance you should be able to achieve PCI compliance without significant costs or headaches along the way. For merchants that are confident we can step aside and let them work on their PCI certification directly. We are here to help as much, or as little, as you need along the way.

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- About the Author

David Goodale My name is David Goodale, CEO at Merchant Pricing is often one of the most confusing topics in the merchant services industry. I strongly believe that flat (non-fluctuating) pricing and interchange plus pricing are the only good pricing models in the industry. If you have any questions about this article, pricing, or other questions in general about your merchant processing agreement don't hesitate to contact me. I'm always happy to help with an honest opinion, and enjoy chatting with folks from interesting businesses!

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