Does Your Business Need a Merchant Account?

Does Your Business Need a Merchant Account?

Does Your Business Need a Merchant Account?

As a small business owner 20 or so years ago, one of the most confusing and frustrating things I did was reconcile my credit card transactions. They were deposited in my business bank account with a lag of several days from the time the transaction was completed, and at the time, I don’t think I completely understood exactly what a merchant account was or how it worked. I just knew I needed to have one to process credit cards.

If your business accepts credit cards and debit cards, you need a merchant account. A merchant account isn’t something you can just do on your own, you need to establish a relationship with a merchant services provider to create an account. 

What is a Merchant Account?

Basically, it’s an account where you transfer funds from your customers’ credit and debit card purchases after they’ve been processed. You will most likely not have direct access to the funds in your merchant account, but the funds will be automatically deposited into your business banking account, usually within one or two business days.

How Does a Merchant Account Work?

The merchant services provider, or processing service, confirms the availability of funds whenever one of your customers uses a credit or debit card to pay for a product or service. If there are sufficient funds, they will authorize the transaction and funds will be deposited into your account.

There are usually fees associated with every transaction of anywhere from 3% to 5% (depending on the merchant services provider). These fees will be deducted from each transaction before the funds are deposited into your account. These fees can also vary depending on the card issuer. For example, American Express fees might be different from the fees VISA charges which may be different from the fees associated with a debit card.

This was one of the things that caused me bookkeeping headaches. Reconciling each transaction when it was deposited, making sure to account for the processing fees, and the two- or three-day lag waiting for the transaction was a bookkeeping chore that ate into the time I needed to do other things. At the time, like many of my small business peers, I lacked the bookkeeping savvy to understand how important it was to stay on top of all that stuff and probably should have accommodated for the credit card fees in the price of my services if I was going to accept credit cards, but I didn’t. 

That was a lesson I had to learn the hard way.

How Does a Business Establish a Merchant Account?

There are numerous merchant service providers, so there will be a lot of options to choose from, but individual providers may charge different fees, offer different features, along with varying contract terms. In other words there are good providers and bad providers.

The standard contract length today is three years with additional fees for early termination. Some service providers will go on a month-to-month contract, so you’ll want to look at several providers before you sign on the dotted line. It may also be worth it to talk to other small businesses in your community to learn about what they have done to help inform your decision. The local chamber of commerce meeting could be a good place to get that information.

Once you’ve gone through the evaluation process and decided on the provider you want to use, it’s usually pretty straightforward. You’ll need to provide information like your business name, contact information, tax information, along with the routing and account numbers to your business banking account so they can make the automatic deposits. You may also be required to provide a credit card number to pay the transaction fees, depending on the service you choose.

You may also be liable for any chargebacks or refunds on your account. What’s more, don’t be surprised if the merchant services provider pulls your credit report before they set up your account.

You should also be aware that those cancellation fees can be pretty steep if you terminate your merchant services agreement before the contract termination date.

6 Easy Approval Merchant Accounts to Get Started

  • Summa Office Supplies
  • Quill
  • Grainger
  • Uline
  • Wise Business Plan
  • Crown Office Supplies

Summa Office Supplies

Products offered: Office supplies such as paper, folders, envelopes, labels etc.

Reports to: Experian and Equifax (business credit)

Worth noting: Summa Office Supplies is eager to work with small businesses, and their stated goal is to provide the “human touch.” They offer credit for both new and well-established businesses and will provide written trade credit references upon request. As you establish a positive payment history, you can request larger credit lines.

Open a Summa Office Supplies account now. Use code SOSNAV at checkout.


Products offered: Office supplies, including a wide variety of supplies in the following categories:  cleaning, coffee/snacks, safety, laboratory, healthcare, health and wellness and more.

Reports to: Dun & Bradstreet

Worth noting: Some business owners with no business credit history have reported they were required to purchase at least $100 of products per month over a 90 day period and pay those off before qualifying for a net-30 account.

Open a Quill account now


Products offered: Over 1.6 million industrial and safety products offered

Reports to: Dun & Bradstreet

Worth noting: While a Grainger account is generally easy to get, some business owners have reported that they were unable to qualify immediately because they had no business credit references, or because their business was just recently incorporated. Some found they were able to talk with a representative to establish credit terms, while others had to start with other accounts.

Open a Grainger account now


Products offered: Packaging, janitorial, food service, safety warehouse supplies and more

Reports to: D&B and Experian (business)

Worth noting: Most business owners report success opening a credit account with Uline. If your business is young and you have trouble qualifying, you can contact their credit department.

Open a Uline account now

Wise Business Plans

Wise Business Plan® specializes in creating professionally written business plans, pitch decks and Powerpoint presentations for small business owners. Plans cover a variety of purposes, including franchises, non-profits, as well as investor grade and bank compliant plans. Each business plan is custom written by writers with MBAs, researchers, and financial modelers, and are professionally designed. Wise Business Plan purchases are paid for with 50% due up front and 50% due before releasing the draft. Those purchases are reported to Dun & Bradstreet.

Open a Wise Business Plans account now

Crown Office Supplies

Products offered: A wide variety of office supplies including everything from artwork to computers to snacks and more

Reports to: All major commercial credit agencies, including Dun & Bradstreet, Experian, Equifax, Credit Safe, and NACM

Crown Office Supplies is eager to work with both new and established businesses. There is no personal credit check. Businesses without an established commercial credit history will be offered base credit line which can grow as long as they are making their payments. There is a $99 annual fee (which may be waived for businesses with a strong business credit history.) This annual fee is reported to the bureaus, which may further help the business establish credit.

Open a Crown Office Supplies account now

There are Different Types of Accounts Available Depending on the Nature of Your Business

If your business is a brick and mortar business you might need different services than those required for an online business—which may also be different for businesses that do most of their transactions via the telephone. With that in mind, there are a number of variations of a merchant account you need to be aware of.

  • Retail Merchant Accounts: If your primary business does business out of a physical location, your needs will be different than a strictly online business. You’ll be able to physically inspect the credit card and possibly even ask to see some ID. My merchant services provider preferred that we didn’t take a lot of credit cards over the phone in those days, because they perceived them as higher risk, and it’s safe to assume that might be reflected in the fees you are charged for each transaction.
  • Internet Merchant Accounts: Many businesses today, even if they have a brick and mortar retail location, also do e-commerce business. Many other businesses are strictly online and never see their customers or their credit cards in person. Your service provider will want to know how you transact business because in addition to the fees they charge you, it might also impact the device (or interface) you use to accept credit cards. An online business will likely not require a card reader, for example.
  • Mobile Merchant Accounts: There are some businesses that do business strictly on mobile devices, which may or may not physically run your credit card. If you’ve even swiped a Square® card reader, with a food truck, kiosk, or similar business, for example, you’ve done business with a business that requires a mobile merchant account.
  • Telephone Merchant Accounts: Some businesses still predominantly take payments for services over the telephone. When I was a small business owner, my merchant services provider preferred we not take credit cards over the phone, so we had additional protocols when we did to reduce the risk of fraudulent transactions.
  • Mail Order Merchant Accounts: Many merchants still do business via the mail and allow their customers to submit credit card numbers to pay for purchases. This presents additional challenges to the merchant services provider because customers are manually writing their credit card numbers on an order form and like many of the other transaction types, they don’t get to inspect the credit card before the transaction is submitted.

What is the Cost of a Merchant Account?

As mentioned above, you should expect there to be fees associated with each transaction, but those will likely not be the only fees you should expect to pay for the convenience of accepting a credit card.

Fees vary depending on the provider, but here are some of the fees you should expect.


What is a Payment Service Provider (PSP)?

In recent years, a number of new players like Square, PayPal, and Stripe have entered the market to disrupt the market. These PSPs aggregate their users into something similar to a single, large, merchant account.

These services are probably best suited to businesses that do a relatively smaller volume of transactions (less than $5,000 per month) and typically operate on a pay-as-you go basis without long-term contracts or commitments. Smaller businesses that don’t require all the services offered with a more traditional merchant account, may find the PSP model does a better job to meet their needs.

Nav’s Final Word: Merchant Account

Regardless of whether you have a physical location, work out of a truck, or an online business, accepting credit cards is likely part of the equation. To do that, your business will need some kind of merchant account to process those transactions before they can be deposited into your business bank account. Before you decide which merchant service account makes the most sense for your business, be sure to shop around, look at two or three services, and maybe even speak to other small business owners in your area to see what services they like best.

Accepting credit cards is convenient for your customers and critical (depending on the nature of your business), so the service you choose needs to make sense for you and your business needs.

This article was originally written on June 11, 2020 and updated on December 29, 2021.

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