The requirements to open a merchant account vary by merchant industry, estimated dollar volume of payment processing and how you’ll accept credit cards. Part 2 of this series examines the retail merchant who will process under $1,500,000 annually.

Retail means that the customer will pay in person and you’ll swipe the credit card for payment.

The merchant SIC code is used to assign risk. The higher the risk, the more documents required to open a merchant account. The level of risk varies over time. For example, when the mortgage crisis hit, flooring and furniture stores were relegated to high risk because they are heavily tied to the housing market. Below are some general guidelines for what you can expect.

LOW RISK MERCHANT ACCOUNTS
These merchants provide the fewest documents. A simple example is:
- application
- schedule A pricing page
- voided check or bank letter
- recent processing statement, if existing business

MID-RISK MERCHANT ACCOUNTS- All of the above, plus:
- 2 recent consecutive months merchant statements

HIGH RISK MERCHANT ACCOUNTS- All of the above plus:
- 3 recent consecutive months merchant statements
- personal guarantee

Note: Some processors will require 2 years business financials for mid and high risk merchants. Additionally, the business and personal credit score may be used in in determining your approval. We highly recommend that you are upfront with your sales agent about your personal credit score. If under 700, additional documentation and a personal guarantee may be required at any level.

Common question- Why do I need to provide my social security on the merchant application?

Part 1 of the series answers What are requirements to open an internet merchant account?

I specialize in consulting and merchant account set up for those processing over $1,000,000 annually.

I don’t have the answer for which Retail POS Solution you should choose, but I do have some extremely important tips.

1. Do not enter into a long term contract for your payment processor unless you have been in business for at least 3-5 years.
2. Do not choose a POS solution that has limited choices for who will do your credit card processing.

This is a true story. I contacted a specialty retail shoe store that I shop at to discuss their credit card processing. They are using http://www.ricssoftware.com/ which seems like an excellent solution for this merchant store. In fact, it seems like a great solution for any shoe retailer, their target audience. But no where does it mention, that I could find, that the customer has NO CHOICE about who their payment processor is. That’s right, no choice! RICS is only compatible with ONE merchant service provider.

I talked to RICS about who they use. It’s a quality company, but they don’t necessarily provide the best solution for the retailers. In fact, I’d bet that 50-70% of their retailer merchant accounts could save significantly on credit card processing with a different merchant service provider. I’m not guessing. I know that a certain portion of them are too small to realize any significant benefit. Most of the rest of them are on a price plan usually reserved for very small businesses, or new businesses.

New businesses always pay a premium for merchant card processing fees. That’s because they are higher risk than established businesses. The most stringent underwriters, those that you can get the best deals from, require two years healthy financial statements. Once your business is established you are in a better position to get a permanent solution for managing credit card costs. What do I mean by permanent? One that enables the merchant to see how they are qualifying for interchange levels and what interchange levels they are hitting. Without that transparency, you can’t even begin to manage your costs.

In summary, make sure you choose a retail POS solution that is OPEN and doesn’t lock you into a single vendor solution- whether it be hardware, merchant service provider, or some other service. The more flexibility you have, the easier it will be to grow and expand later without disruption to your business.