Many small businesses find that the ability to process credit cards can help increase their revenue. However, signing up for a traditional merchant account can seem to be a daunting task. A Merchant Service Provider will most likely ask for bank statements, credit history reports, personal businesses information and more. Rather than spending the time to set up a merchant account, many small businesses turn to merchant aggregators.
What is the difference between Paypal, Google Wallet, Square and a Traditional Merchant Account?
Paypal, Google Checkout and Square are some of the biggest merchant account aggregators in the business. They allow small businesses to process credit card transactions without having to sign up for a traditional merchant account. This works because the merchant account aggregator does all the work to set up a merchant account. They will then allow small businesses who sign up for their services to use their merchant account. Additionally, each business will have separate access to their own accounts without viewing other small businesses that are sharing this account.
When you sign your small business up for a traditional merchant account, then you are using a merchant account that belongs to you and only you. In terms of setting up a traditional merchant account, the process can be a little more complex but you will have much more overall control over your account. With your traditional merchant account, your fees can be negotiated based on your volume where the aggregators have fixed fees and do not take this volume into consideration. Generally, aggregators tend to be more in line with business accepting approx $2,000.00 a month in credit card transactions where the traditional merchant account providers are looking for more established, higher volume and growth potential merchant that will be in business for years to come.
Who Should Use Merchant Aggregator Processing Services?
Merchant Aggregators can be an attractive option for small businesses owners who need a quick solution to process credit card transactions. You typically only need a credit card or bank account on file. Additionally, you only pay fees when a transaction is processed and it only takes a few hours to set up an account through a merchant account aggregator.
A merchant aggregator is not typically favored by both issuers as well as merchant service providers as the potential for fraud is extremely high with these accounts. Those who sign up for an account do not typically go through the complex screening process that many small businesses go through when signing up for a traditional merchant account. However, because of companies like Paypal the credit card companies still work with merchant account aggregators as it is a popular service for many small, legitimate businesses.
However, the credit card companies acknowledge aggregators as “extremely high risk” in order to subject aggregators to stricter rules when it comes to processing transactions. Often times small businesses who use aggregators will find much longer hold times on the money processed through the merchant account aggregators. This is usually standard procedure for new businesses until they show a proven history of legitimate transactions that are successfully processed.
There are also strict rules in place for how much volume can be processed through a merchant account aggregator. If you go over the processing limit, then you will be required to set up an official merchant account.
A payment aggregator can also quickly suspend your account at any time as another method to root out any fraudulent businesses that are set up on their account.
Also, unlike a merchant account, you are unable to negotiate for better fees. A merchant account is customized to your business which means your merchant account service provider is much more likely to find ways to lower your fees based on your industry and business model.
Who Should Consider a Traditional Merchant Account?
If you have a stable business model, a higher transaction volume than approx $2,000.00 per month and would like to customize your fee structure, then you may want to consider a traditional merchant account. While you are typically charged a monthly fee, your percentage rate and per transaction fees are lower. You will also have access to different tools for your business including: virtual terminals, credit card processing equipment, recurring billing and extensive reporting on each transaction.
How Do I Set Up a Traditional Merchant Account?
Many merchant account providers need as much information as possible to get you the best pricing possible. Based on your history and income they can offer a variety options that will work best for your business. In most cases, all they need is some recent credit cards statements if you are currently accepting transactions and a copy of the signer’s driver’s license. Some additional documentation you may be asked for include:
Most recent tax returns
Most recent financial statements
Most recent bank statements
Information about How Your Business is Set Up (DBA, Partnership, Corporation)
IRS Confirmation of Non Profit Status — 501(c)(3) status
How Do I Set Up a Paypal Account
To sign up for a Paypal Account you will need a verifiable email address. Be sure that it is one you use often as Paypal will communicate all sales transactions through this email. It is also the email you can give out to customers who request to send a payment to you.
While signing up for a Paypal Account is free, you will also need a credit card or a bank account on file to transfer money and pay for transaction fees.
From there you can do a variety of things with your Paypal Account. You will be able to quickly transfer money from one Paypal Account user to another.
How Do I Set Up a Google Wallet Account?
To set up a Google Payments account, you will need to log into the Google Payments Merchant Center. This can typically be done with a Gmail Account. You will be asked to fill out the following forms for your business account:
“Your Business name: Enter the name of your business as you want it to appear on your page. Remember that this information will be shown to your customers and will also be shown on your receipts.
Contact name: Enter the name of an authorized representative for your company. This should be the person Google can contact if we have questions about your account.
Business Location: Provide your legal business address as it appears on official documents.
Address: It’s important that we have a valid, physical address on file for your business. For that reason, we do not support PO box addresses at this time.
Phone number: This should be a phone number that Google can contact if we have questions about your account.” *
Choosing between a merchant aggregator and a traditional merchant account really comes down to understanding the credit card processing needs of your business. If you are confused or need help, contact a SecureGlobalPay representative today!
*Source: Google Support