Merchant Account Requirements That You Need To Know


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In today’s business world, a majority of consumers make payments using their credit or debit cards. In fact, recent statistics show that more than half of the population in the US prefer cashless payments. As a business, if you want to improve sales and legitimize your business in the eyes of your customers, you must start accepting credit card payments. One of the requirements that you have to meet to accept such forms of payments is to establish a merchant account. A merchant account is a type of bank account that allows you to accept electronic payments including credit and debit card transactions. However, for you to apply for a merchant account, there are some requirements that you have to meet. And if you’re stuck on how to set up a merchant account, you’ll be glad to know that, we are here to help. Our merchant account requirements detailed guide will help you prepare the needed documents enabling your merchant account application process to be smooth sailing.

Merchant Account Requirements That You Shook Take Into Account

How to set up a merchant account Merchant accounts are provided by merchant account service providers. These providers will require you to provide them with different documents and information so that they can decide if you qualify for a merchant account. So, what are these requirements that you need to meet to have your merchant account approved?

1. Get Ready For the Underwriting Process

The first thing you need to know before you apply for a merchant account is that you’ll have to go through an underwriting process.  During this process that may take days or a few hours, the financial institution supporting your merchant account application will determine the legitimacy of your business and basically assess how much of a risk they’ll take on if they decide to approve your application. The process is necessary as it protects the bank from financial risk in case of a chargeback or fraud. Your merchant service provider can help you prepare for this process by telling you what to expect and the necessary documents you need to provide to your bank.

2. Get Your Business License

If you don’t have a business license already, you need to get one. A business license is needed during the underwriter’s review and also when you’re opening a bank account, both of which are requirements needed for opening a merchant account. Depending on the type and your business location, you may need a federal or state license. Also, some businesses require you to have multiple licenses. To check which license your business needs, research your state’s business requirements and follow the state’s business registration process to get a license.

3. Employer Identification Number

An employer identification number (EIN) is also known as the Federal Tax Identification Number. It’s a unique number that helps identify your business and it’s also used for tax purposes. The number is necessary when opening a business account as it also helps your merchant account provider identify your company. This number is issued by the IRS and you can get it for free from their website. All partnerships, limited liability companies, and corporations need to have this number. However, in case your business is a sole proprietor, you can use your social security number instead of the EIN for business identification.

4. A Bank Account

A bank account is an important requirement for opening a merchant account. This is because the money you’ll earn from your credit card transactions will be deposited in this bank account. Besides, your provider will debit their fees from this account. If you’re a sole proprietor, you may be allowed to use a personal bank account. But it’s advisable to have a business bank account so that you can separate your business from your personal finances. Ensure there are enough funds in your account that can cover your merchant account provider’s fees. An account with a negative or low balance may make your business look riskier during the underwriting process. Opening a bank account should be a straightforward process, as the only thing you’ll need is your business license and your EIN. However, it’s always good to compare different banks and their account opening requirements and perks so that you can settle on a financial institution that is fit for your business needs.

5. A Voided Check or a Bank Letter

Your merchant services provider will want to see a voided copy of a check to confirm the details of your business account. Some of the details they’ll be interested in include the name of your business, routing, and account numbers. If you just opened your bank account, and you have yet to receive your permanent checks, you can always give your provider a signed bank letter that has your bank and account number details.

6. Articles of Incorporation

All businesses need to provide their merchant account providers with proof that they run state-recognized legal entities. If your business is an LLC, you’ll need to present your articles of organization to your merchant service provider, while corporations are required to provide articles of incorporation.

7. Financial Statements

Another important requirement that you have to meet when opening a merchant account is to present your provider with your business financial statements. These statements may also include your business banking records and tax return statements. In some instances, your provider may need to see your personal financial statements, especially if you just started your business. Such statements are necessary to verify that you or your business is in good financial standing

8. Supporting Documents

In some instances, your payment service provider may ask you for additional business documentation. For instance, if your provider feels your business is a high risk, they may require you to provide the previous year’s financial statements. Other documents that you may be required to provide include inventory reports, business plans, refund and exchange policies, and guarantees and warranties. It’s always advisable to have these documents ready even if you aren’t sure they’ll be required, as this will hasten your application approval process in case your provider asks for them.

9. Previous Credit Cards Processing Statements

If you’re already accepting credit cards, you’ll need to have at least three of your past processing statements ready. Your provider will use the statements to verify the transactions you process monthly and also verify if there are any chargebacks. This information helps your provider determine the risk level of your business.

10. PCI Compliance

Once you begin your merchant account application process, start planning how to be PCI-compliant.  PCI compliance involves putting up security measures that help secure your customers’ data. It also involves being compliant with the regulations set by the PCI Data Security Standard (DDS). To determine your compliance, you’ll be required to fill in an annual self-assessment questionnaire. Your merchant provider can also help guide you on measures you need to take to build a secure network that protects your customers’ data.

11. Fill In Your Online Application

The last step during the opening of a merchant’s account is to complete an application form for your physical or online business. For your application to be approved, you’ll have to include it with the required documents. Ensure you have done prior research before the application to know what is expected of you. A good provider should also give you a breakdown of the documents you need to provide and other requirements you need to meet for your application to be approved.

Reasons You May Not Be Approved

Merchant account requirements Even as you prepare for your merchant account application process, it’s essential to know that there are instances when your application may be declined even after providing all the necessary documents. For instance, some providers will reject a merchant account application if they feel the business is associated with a high-risk industry such as pawnshops, CBD, credit repair, Multilevel Marketing, and firearms. Other common reasons why your application may be rejected include.

  • Poor credit history – Your provider will most likely check your credit history and that of your business. If you don’t have a good business and personal credit history, the chances of your application being rejected are higher.
  • New business – Some merchant service providers will not want to work with new businesses due to a lack of past business history. However, this shouldn’t be a cause for worry as you can find providers who are willing to take a chance on you provided your business is legitimate.
  • If you’re on the MATCH list – If your merchant account has been terminated in the past, you may be on the MATCH list. The MATCH list is accessible by all credit card payment processors and acquiring banks. Once you’re on the list, your name will remain there for five years. The good news is that some providers may still approve your merchant account application if they see you’re taking extra steps to get off the list.
  • Excessive chargebacks – If your business has frequent disputed credit card transactions, it’s termed high risk and most providers may be unwilling to do business with you. Besides, some merchants will reject applications from businesses with high processing volumes, as these are assumed to have a higher risk of chargebacks.
  • Misleading information – Your application may be rejected if your provider discovers that you’re not being truthful about your monthly sales volume or average ticket size. Other high-risk businesses give false information about the products they’re selling. The best thing you can do if you want your merchant account application to be approved is to be truthful.
  • Your business is considered high risk – The type of business you’re operating also matters. Most providers have a list of high-risk businesses. These industries may also be unacceptable to most banking partners, making it harder for the providers to process applications of businesses associated with such industries. However, if your application is rejected for being a high-risk business, you can always seek help from a high-risk credit card payment processor
  • Link to fraudulent activities If your bank associates your business with illegal or dishonest activities, they may reject your application. For instance, if you’re selling controlled drugs or offer services associated with illegal adult content, many providers will not want to do business with you.

How Much Does a Merchant Account Cost

When it comes to the cost of your merchant account, always read the terms of your contract carefully and ensure you understand the different fees that will apply to your account. If there are any fees that you don’t understand, follow up with your provider. Additionally, shop around to find a merchant account provider with reasonable rates. Besides, if you have a good relationship with your provider, you can negotiate to have some of the charges reduced. We also recommend that you look at our article on the acceptable merchant account fees, as some providers are known to have some unreasonable costs. Notably, the overall cost of your merchant account processing fees should be between 2.5% and 3.5% of your processing volume. Anything beyond this may be too high.  However, if you’re a high-risk business, expect your total fees to be a bit higher.


Getting your merchant account approved doesn’t have to be a long and tedious process. With the help of this guide, you can get the required documents ready for both the underwriting and application process. Also, read your merchant provider terms and conditions carefully to know what you’re getting yourself into before the application is approved. If you’re looking for a transparent merchant account provider, consider eMerchant Authority. At eMerchant, we provide merchant account services for all types of businesses, including high-risk ones. Our services are reliable and affordable, and you can trust us to be transparent with our costs.