Regardless of where you set one up, merchant accounts are unique to each individual and each individual business, and are set up specifically for each individual merchant. While the various organizations which offer merchant accounts have different terms of service, the one thing that is the same between all of them is that you will be assigned a unique merchant account number, otherwise known as a merchant account ID. This number is the way that you and your business are identified by the financial institutions and credit card organizations that process credit card transactions on behalf of your business, no matter where in the world you are located or what type of services and products you offer.
The traditional procedure for a physical location is that each merchant needs to be given permission for credit card transactions directly from a major bank. Provided the application goes through, you will be granted merchant status by the financial institution, and will then be given a merchant account number that identifies you to the bank. These days, ISO (independent sales organizations) can also help you obtain a merchant account number, if your business is considered high risk.
Every single financial institution dealing with credit cards has a bank behind it known as an acquiring bank, which is the institution behind the scenes with the actual money. Only the acquiring banks are capable of issuing merchant account numbers, and you are only allowed to begin accepting credit card transactions for your business after the bank has authorized your merchant account. Keep in mind that the bank can reject your application. The ISO manages the account and helps collect any payments on your behalf, using your unique merchant account number, and deposits the money directly into your bank account, while working on your behalf with the acquiring bank. Costs vary depending upon the organization, but there are generally a variety of setup fees that you will need to pay in addition to monthly or annual fees. If you have a physical location, there will also be a rental fee for the terminal which allows you to process credit cards, and the ISO will generally charge a percentage of each transaction processed through your merchant account number.
In order to obtain your unique merchant account number you must first apply to a bank and satisfy the requests of proof to show that you are worthy of their trust. It is important to remember that you will need to provide at least two years of audited accounts in addition to demonstrating a proven track record of success with your business. Even if you are eventually given approval for merchant status and are warranted a unique merchant account number, it only applies to a physical location. If you have business plans to set up a website and accept credit cards via the Internet, there are a variety of other paths which must be navigated in order to gain online merchants status.