Merchant Account Services

Merchant Accounts 101

Everything You Need to Know to About Merchant Accounts


Author: Jim Conners

Rating: 10.0

Pages: 1|2|3|4|5|6|7|8|9|10|11|12|13

Establishing a Merchant Account

Establishing a merchant account can be anywhere from a smooth and easy process to a nightmare. Where it falls is both the product of the merchant account provider and the merchant themselves. The better the communication between the two the smoother and faster the process is.

Applying for a Merchant Account

An account can be opened in as little as four hours or as long as a few days depending on when the application is submitted and the underwriting guidelines of the processing bank. The application process should never take longer then that without a clear and legitimate reason. If your application is taking two weeks to be approved and you’ve had little to no communication with your sales agent, something is wrong and you should consider canceling your application.

Establishing a third party account will vary from provider to provider as each has its own criteria and verification process. Your account can go live anywhere from immediately to several days or weeks. Also, the services made available to you may depend on verification of your business or personal information.

For planning’s sake the process setting up of a merchant account should be started two or three weeks before you expect to “go live”. This will allow for unexpected delays and testing of the account and gateway.3


All merchant account providers require that every business sign a contract when establishing their merchant account. At the very least this contract will specify what the merchant's responsibilities are as well as those of the merchant account provider. This ensures that the merchant account provider has as much protection as they can from loss due to risk and other factors. (See "Security and Risk" below to see why this is the case).

Another important factor specified in some contracts is the length of term of the contract. Some contracts require the merchant honor their contract for a set period of time. Failure to complete the contract will result in a penalty being assessed also known as a cancellation fee.

The entire contract should be available to the merchant before they sign it.

Too learn more about the length of terms a merchant account processing contract may expect read our blog post Understanding a Merchant Account Contract's Length of Term.

Personal Guarantee

When applying for a merchant account most small and medium-sized merchants will notice that a personal guarantee is required to establish the merchant account. A personal guarantee basically says that if the business cannot fulfill its obligations to the processing bank then the processing bank can legally pursue the guarantor to fulfill those obligations. This basically means if your business owes the processor money and it does not or cannot pay then the bank can come after the guarantor seeking those funds.

The reason why the processing bank does this is because of the high risk they are exposed to due to the nature of their business. If a new merchant commits fraud or just mismanagements their business and merchant account, the processing bank can be on the hook for a large sum of money.4 Naturally they wish to protect them from this scenario as best they can. By having the owner put their personal assets behind the business they mitigate this risk.

Too learn more about opening a merchant account without a personal guarantee read our blog post Opening a Merchant Account Without a Personal Guarantor.

3 How Long Does It Take To Open An Account?
4 Opening a Merchant Account Without a Personal Guarantor

Other Fees | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | Security and Risk