As a business owner, you might already know that debit and credit card payments can be processed through merchant services. Yet having a merchant account isn’t just a tool; it’s a growth engine. Small businesses that accept a diverse range of payment methods are expected to see growth in 2026, while 86% of all U.S. consumer payments are now made via credit or debit cards.
A merchant account is essential for businesses to accept card payments, acting as an intermediary between the customer’s payment and your business account. This setup ensures that card transactions are processed securely and efficiently before funds are deposited into your main business account.
It’s important to note the distinction between a business account and a merchant account: a business account is used for managing your company’s overall finances, such as receiving payments and handling expenses, while a merchant account is specifically for processing card payments before those funds are transferred to your business account.
However, the process of setting up a merchant account is not that well known. This is primarily due to the various steps that are involved in setting up payment methods through merchant account providers.
Even if it might seem a little tricky at first, signing up with a conventional or online merchant account services provider is really quite simple. You’ll need to take your time to understand the underlying aspects. Once you have sufficient knowledge about merchant account services, you can move forward with signing up for traditional and mobile payment processing solutions with ease.
From a high-level view, once you’ve chosen your preferred account provider, you’ll need to submit an application with a variety of documentation, like your business license and credit history. Once the provider approves the application, you go through the underwriting process and then set up your new equipment and software. After that, you’re up and running.
Of course, that’s a bird’s-eye view. With this in mind, let’s dive into a detailed overview of how merchant services actually work, more about what goes into the process of opening a merchant account, as well as what to look for when searching for the right merchant account provider.
- How merchant accounts work
- Identify the kind of merchant services you need
- Determine merchant account costs
- Find the best merchant account provider for your business
- Submit your merchant application
- Set up the merchant equipment and software
- Start processing payments
Understand how merchant accounts work
In 2025, merchant services processed 65% of all small business sales revenue, a 3% increase from the previous year. Meanwhile, businesses that still rely on physical checks are 16 times more likely to experience fraud or theft compared to those using electronic transfers. This makes securing a merchant account more necessary than ever.
Before you start the sign-up process with merchant account providers for your small business, let’s first look at how these services work.
Setting up your merchant account involves a relationship between three parties: the merchant, the acquiring bank (the financial institution that backs the account), and the payment processor (the technical company that manages the transaction flow and authorization). Merchant accounts are often provided through payment processors or independent sales organizations (ISOs), which partner with banks to facilitate merchant accounts and ensure compliance with payment network requirements.
- The merchant. This refers to you and your business.
- The acquiring bank or merchant account providers. This is the entity you will sign up with to hold your merchant account and receive funds from customer payments.
- The payment processor. This refers to the entity that manages and authorizes the actual transactions from credit card companies such as Visa, Mastercard, and American Express that you will accept payments. They are responsible for ensuring funds are transferred so that businesses get paid on time.
After transactions are processed through your merchant account, the funds are typically transferred to your business bank account within a few business days.
The merchant account process
The set-up process for a merchant account actually begins with the need to start accepting card payments from your customers. You need a merchant account to be able to accept credit and debit card payments, and they are usually provided by banks authorized by card networks to acquirers/receive payments on behalf of the merchant.
To do that, you then need to enter a contract with an acquiring bank or a reliable payment solutions provider. These solution providers then let you select which credit card networks, such as Visa or Mastercard, you will accept payments from.
No matter the type of merchant account you want to set up—conventional, mobile, or online merchant account services—the involvement of the acquiring bank/payment provider, as well as the credit card network, remains a constant feature.
Whenever a customer submits their payment via a card reader or enters its details on your checkout page, the information is processed through your acquiring bank or payment solutions provider.
From there, it’s handled by the credit card networks such as Visa or Mastercard, which authorize the payment and transfer it to your merchant account.
The payment procedure goes through multiple steps to complete. But even then, the process is completed within a few seconds.
Learn MoreBusiness requirements for opening a merchant account
Before you can start accepting card payments, it’s important to ensure your business meets the necessary requirements for opening a merchant account. Most merchant account providers will ask for a valid business license, a business bank account, and a physical business address. These essentials help verify your business’s legitimacy and ensure that funds from credit and debit card transactions are deposited into the correct bank account.
In addition to these basics, you may be required to provide supporting documentation such as recent financial statements, tax returns, and identification documents for business owners. Some providers may also request details about your expected transaction volume and the types of card payments you plan to accept. This information helps the merchant account provider assess your business’s risk profile and determine appropriate processing fees.
It’s crucial to research the specific requirements of your chosen merchant account provider, as these can vary. Understanding what’s needed ahead of time will help you avoid delays and ensure a smooth application process. As you prepare, consider how processing fees and cash flow will impact your business finances, and choose a provider that aligns with your business needs and growth plans.
Learn what kind of merchant services you want
The first step in signing up for a merchant account comes in the form of deciding what kind of services your business needs.
A merchant account enables your business to accept payments across multiple sales channels, such as in-person, online, and mobile, providing flexibility and convenience for both you and your customers.
Keep in mind that the primary goal of signing up with merchant account services is to accept credit and debit card payments and not depend on cash transactions.
However, the right merchant services provider will arm you with all the payment options, including the main types of payment methods and how to accept them, and resources your business needs to go even further than that. It also supports the ability of your business to create a higher quality of service for your customer, while also saving your company money. There are several types of payment terminals, including fixed terminals (countertop systems), portable/mobile terminals (card readers, phones, tablets), and virtual terminals (software used for remote entry). When choosing a provider, it’s important to look for integration with accounting software to streamline financial management and improve efficiency.
In-person payments
If you run a brick-and-mortar store, then going with a conventional point of sale (POS) terminal is a good idea. POS terminals can process payments by syncing with the merchant software on your register.
Mobile payments
If you require a mobile setup, then you can go with mobile payment processing solutions. These modern card readers are wireless and can attach to your iOS or Android devices to process card payments on-the-go.
In addition to simply accepting credit card payments on a mobile reader, you’ll also want to find out if you can take digital wallet payments like PayPal, Venmo, or Apple Pay.
Ecommerce payments
Conversely, if you have an online business, sign up with a merchant account provider that provides you with an online payment gateway. This allows you to accept online transactions over the web and receive them directly in your bank account via your merchant services provider. Some merchant account providers also enable businesses to accept ACH payments, allowing customers to pay via direct bank transfers, which often come with lower fees and seamless integration for both online and in-person payments.
Depending on your business needs and the payment processor you choose, a separate merchant account may be required for online payment processing, while some platforms offer integrated solutions that eliminate the need for a distinct, standalone account.
Over-the-phone payments
Similarly, if you process payments over the phone, then you can sign up for a virtual terminal that will allow you to enter the customer’s card details manually into your system.
An important piece to consider: Depending upon the type of merchant services you want to set up, you should ensure you also receive the proper payment processing equipment needed to accept your preferred credit card payment types.
This equipment comes directly from your acquiring bank or merchant services provider and has different costs associated with it. In the case of online payments, this comes in terms of software and payment gateway support and has a service fee associated with it.
Merchant account costs
Regardless of the type of payment solutions you end up choosing from your service provider, you will have to account for a variety of fees to be able to benefit from them.
These costs include but are not limited to:
- Setup fee: A one-time fee for opening your merchant account, typically ranging from $50 to $200, though many providers waive this fee.
- Monthly maintenance fee: A recurring charge for account management, usually between $15 and $250 per month depending on services required.
- Transaction fee: A fee charged per transaction processed.
- Credit card processing fees: Typically range from 2% to 3% of the transaction amount.
- Equipment fee: Cost for payment terminals or hardware.
- Annual fee: Charged annually or quarterly for ongoing account maintenance, PCI compliance, and related services, often ranging from $79 to $399.
- Batch fee: Charged each time you settle or “batch” your daily transactions, emphasizing the importance of closing batches regularly to avoid higher processing rates.
- Minimum amount: The minimum fees a merchant is required to pay monthly, regardless of transaction volume.
- Monthly minimum fee: Ensures merchants pay a baseline amount in fees each month, even if actual transaction fees are lower.
- Early termination fees: Charged if you end your contract before the agreed term, ranging from $250 to $5,000 or more. Some providers may assess all remaining monthly minimums if a contract is terminated early.
- Chargeback fees: Fees incurred when a customer disputes a transaction, typically ranging from $20 to $50 per chargeback.
- Hidden fees: Additional charges not immediately apparent, such as statement fees, PCI non-compliance fees, or network access fees.
Some providers charge an annual fee for maintaining the merchant account, which can range from $79 to $399. Additionally, a batch fee may be applied each time you settle your daily transactions, so it’s important to batch regularly to avoid higher processing rates from card networks.
A monthly minimum fee ensures you pay a baseline amount in fees each month, regardless of your transaction volume. If you terminate your contract early, some providers may assess all remaining monthly minimums, which can significantly impact your costs.
Chargeback fees, which range from $20 to $50 per chargeback, are assessed when customers dispute transactions. Early termination fees, which can range from $250 to $5,000 or more, may apply if you end your contract before the agreed term. It’s crucial to be aware of hidden fees that may not be immediately disclosed, as these can add up and affect your overall profitability.
Interchange fees are set by card networks like Visa and MasterCard and vary based on card type and transaction circumstances, including processing levels (Level 1, 2, 3). Businesses should take time to understand how interchange fees work because they significantly impact overall processing costs.
High-risk merchants—such as those in industries like adult entertainment, travel, forex trading, gambling, or multilevel marketing—typically require a high-risk merchant account. These accounts are subject to higher fees due to the increased risk of fraud, chargebacks, or regulatory scrutiny. High-risk merchant accounts are designed for businesses that may expose an acquirer or processor to financial loss or regulatory issues. In contrast, traditional merchant accounts are for low-risk businesses that are not expected to exceed acceptable risk tolerance.
Higher fees may apply to high-risk merchants or certain types of accounts, while lower fees may be negotiated with providers or achieved by choosing more economical processing options, such as ACH transfers or interchange-plus pricing; understanding ways to get the lowest credit card processing fees can make a substantial difference to your bottom line.
In most cases, transaction fees represent the bulk of fees charged by merchant account providers. Most providers take a cut out of each sale plus a small transaction fee. This pricing model is known as flat-rate pricing, and the transaction fee percentage is based on your sales volume.
While this payment structure works well for businesses with low credit card transaction volumes, it can get pretty costly for high-volume merchants. Thus, they usually go for a pricing model commonly known as interchange-plus or interchange markup pricing. In this case, the provider will charge you the exact interchange rate for that transaction plus a set fee, often between $0.02 and $0.15. Because interchange rates vary depending on the banks and payment type involved, some transactions will end up much cheaper than flat rate.
However, that method can end up still costing high-volume businesses a lot—and it makes it extremely difficult to predict how much you’ll owe in fees each month.
This is where Stax can give businesses an advantage. The average small business spends 3.65% of its total revenue on processing fees. For high-volume merchants, moving from a flat-rate percentage to a subscription-based model (like Stax) can save up to 40% in total processing costs. Instead of taking a percentage of your sales, you’re simply charged a flat membership fee for access to wholesale interchange rates. Stax’s transparent membership-style pricing is often more cost-effective compared to percentage markup models, and its broader integrated payment solutions for businesses help you manage payments, billing, and compliance in a single platform.
It’s also important to note that all merchant account providers work upon the same underlying process, but not all of them have equal services.
Some excel in terms of supporting mobile payments. Whereas, others take pride in delivering additional support with their services.
Depending upon their services, these vendors also charge different fees for the same payment services.
For example, some acquiring banks will charge you their service fee, as well as the credit card network’s processing fee on each transaction. On the other hand, modern service providers often offer reduced costs that are included in their monthly fees. It’s factors like this that can help you differentiate between various merchant account providers and understand your potential expenses between processing rates, annual fees, and additional fees.
Paying close attention while comparing the costs of acquiring banks or service providers is key to finding the best merchant account provider for your business.
Compare different merchant services
Since you can accept credit and debit card payments in a number of ways, it is essential to choose an acquiring bank or account provider that supports all your needs. It’s also important to understand the difference between merchant account providers and payment service providers—while merchant account providers offer dedicated accounts with more control and custom features, payment service providers may have faster approval processes but offer less flexibility and different features such as analytics and compliance management.
For instance, if you need a way to accept credit cards in the form of traditional, mobile, and online payment methods, then your selected payment processor must offer services that allow you to support them all.
Doing so helps you manage all your finances in one location.
In most cases, it also saves you from paying additional setup costs or higher equipment fees.
Additionally, when doing a comparison between each service provider, you should also look at the types of businesses they serve and their customer support. 24/7 live support is crucial to quickly resolve any payment issues that may arise.
Some payment processors also have different restrictions for what they consider high-risk businesses, as well as how they handle PCI compliance.
Reviewing your sales data can help you negotiate better merchant account fees and terms with providers, as it demonstrates your business performance and risk profile.
Key considerations for choosing a merchant account include contract terms, pricing transparency, and funding speed.
Submit your merchant application
Up until a few years ago, getting a merchant account was a very complicated and grueling process. Submitting your business license, physically verifying your business location, and providing your credit score information were all part of obtaining a merchant account.
But thanks to the advancements in financial technology, the process is now super easy and can be completed in minutes. You just need to contact the right provider that uses modern solutions to process all applications.
Visit the merchant account provider’s website
When you have done your research in terms of payment services, costs, and overall reliability, simply visit the website of the acquiring bank or payment solutions provider to apply for a merchant account.
Select the required services
Sign up for the kind of merchant services you need for your small business. You’ll need to specify your needs for conventional and/or mobile payment processing solutions.
You will also need to move forward with choosing the necessary equipment for your solutions.
A great merchant account provider will have experts on hand to help you with the selection process and make sure you are making the best decision that fits your needs.
Submit the required details and documents
Follow the process of filling out all the required details about your business. This will often require your personal information, business information, as well as any additional data that applies to your case.
Depending on the provider, this may feel like the most time-consuming step in the application process. But it is one of the most important, as these extra steps really help in ensuring your business is protected and able to truly maximize all the merchant service providers can offer.
However, with a little bit of planning, this can be easily checked off the list. You simply need to put together the necessary information and documents, which the financial institution will then use to verify and underwrite your application.
Here are the most common documents and details required by merchant services providers during the application process:
- General info and business documentation, including your contact information, and Employer Identification Number (EIN). articles of incorporation, business license, credit history, etc.
- Your business’ financial statements. This includes your business bank account statements, balance sheets, cash flow, income statements, records of credit card transactions, etc.
- Other supporting documents. This may include a business plan, voided checks, forecasts, marketing materials, etc.
Provide additional information if necessary
Depending upon the efficiency of your chosen acquiring bank or payment provider, you will receive an update on your application status in just a few days. For organizations that resell or advise on these services, following a structured approach to selling merchant services effectively can help match merchants with the right providers and streamline this process. Your application may get approved, or the provider might require some additional information to put it through. Submit the details and move on.
Go through the underwriting process
Once your information is submitted, the provider will review and analyze your application to ensure accuracy and evaluate risk. Known as the underwriting process, this step is necessary to determine your eligibility for a merchant account. Dedicated merchant accounts require a rigorous underwriting process but offer more control and potentially lower transaction fees. In contrast, aggregators use shared merchant accounts, allowing for quicker setup but possibly resulting in more account freezes.
This step can take a few minutes to several business days depending on your provider, your industry, and the type of business you have. High-risk merchants may take longer to underwrite, and many are required to register with card brands to meet regulatory requirements.
Set up the merchant equipment and software
The next part of the process is receiving your equipment and setting up your software until you can start using the required merchant services. Upon approval, you may also need to make payments for equipment costs and service fees.
Most merchant account providers make this process easier by providing extensive onboarding support—often even a support person to walk you through set-up. By following the provided instructions and seeking help when you need it, setting up your merchant account is simple, especially if your provider offers robust API-driven payment integration across channels.
Managing your merchant account
Once your merchant account is up and running, proactive management is key to ensuring smooth payment processing and avoiding unexpected issues. For example, using an integrated platform to streamline invoicing and payment collections can improve cash flow and reduce administrative work. Regularly review your account statements to verify all transactions, monitor processing fees, and catch any discrepancies early. Staying on top of your merchant account agreement is also essential—be aware of terms like early termination fees, monthly fees, and chargeback fees so you’re never caught off guard by additional costs.
Handling customer disputes and chargebacks promptly is another critical aspect of account management. Establish a clear process for tracking and responding to these issues to minimize their impact on your business. Additionally, work closely with your merchant account provider to implement fraud prevention measures, such as secure payment gateways and transaction monitoring, to protect your business from fraudulent transactions.
By actively managing your merchant account, you can reduce the risk of account termination, maintain healthy cash flow, and build a strong relationship with your merchant account provider. This not only helps you avoid unnecessary losses but also ensures your payment processing remains efficient and reliable as your business grows.
Best practices for merchant accounts
To maximize the benefits of your merchant account and keep your payment processing running smoothly, it’s important to follow industry best practices, including using tools that simplify and centralize your payment processes. Start by selecting a reputable merchant account provider that offers competitive pricing, transparent processing fees, and responsive customer support. Look for providers that support a wide range of payment methods—including credit and debit cards—through a secure and flexible payment gateway.
Regularly update your account information, such as your business address and bank account details, to prevent disruptions in payment processing. Implementing a robust payment gateway not only streamlines transactions but also enhances security for both your business and your customers.
Chargeback prevention should be a top priority. Provide clear product descriptions, maintain open lines of communication with customers, and respond quickly to inquiries or disputes. This proactive approach can help you avoid costly chargeback fees and maintain a positive reputation with both your customers and your merchant account provider.
By following these best practices—choosing the right provider, supporting multiple payment methods, keeping your account information current, and prioritizing customer service—you’ll optimize your merchant account, minimize costs, and ensure a seamless experience for your customers.
Enjoy a world of efficiency and superior business processes
By turning to physical or online merchant account services, you do not just welcome additional payment methods. You also improve and scale your business operations effectively. Merchant accounts are often offered as part of broader business banking solutions, which may include a business checking account to help streamline your finances and improve cash flow.
Using traditional, conventional, or mobile payment processing solutions allows you to:
- Increase your sales
- Improve your financial management
- Become more efficient in processing payments
- Expand your business operations to include more avenues of delivery
- Deliver a better customer experience through multiple payment methods
If you are on the fence about signing up for merchant services, then this will be the time to make a decision.
Stax is the expert partner that simplifies complexity and provides cost predictability. Our subscription model eliminates the percentage markup, providing the most cost-effective path for high-volume merchants, all while offering easy-to-use support for conventional POS, mobile, and online processing. Move forward with easily integrating modern payment solutions in your day-to-day business operations.
If your business needs change in the future, consider whether it makes sense to switch providers to access better features, expanded functionality, or lower costs.
”RequestFAQs about merchant account
Q: What is a merchant account?
A merchant account is a service that enables businesses to accept debit and credit card payments by processing them through the merchant services. This process involves the merchant, the acquiring bank or merchant account providers, and the payment processor.
Q: How does a merchant account work?
Setting up a merchant account involves a relationship between three parties: the merchant (you), the acquiring bank or merchant account provider, and the payment processor. You need a merchant account to be able to accept credit and debit card payments, and they are usually provided by banks authorized by card networks to acquirers/receive payments on behalf of the merchant. When a customer submits their payment, the information is processed through your acquiring bank or payment solutions provider, then handled by the credit card networks, which authorize the payment and transfer it to your merchant account.
For online transactions, a payment gateway securely connects your ecommerce website to the payment processor, enabling secure transmission of payment data. Additionally, PCI compliance ensures that providers adhere to the Payment Card Industry Data Security Standard (PCI DSS) for protecting sensitive cardholder information.
Q: What is the process to set up a merchant account?
Setting up a merchant account involves first knowing the kind of services your business needs. Services can range from in-person payments, mobile payments, ecommerce payments, to over-the-phone payments. Next, the merchant should compare various service providers for support, costs, and reliability. Once a service provider is chosen, online applications can be filled out and documentation, such as general info, business documentation, business’ financial statements, and other supporting documents, can be submitted for review and underwriting. Lastly, set up the equipment and software provided by your acquiring bank or merchant services provider.
Q: What costs are associated with a merchant account?
The costs associated with a merchant account may include setup fee, monthly maintenance fee, transaction fee, credit card processing fees, equipment fee, and early termination fees. Additionally, many providers charge an annual fee, typically ranging from $79 to $399, which covers ongoing account maintenance, PCI compliance, and related services. Merchants may also encounter a batch fee, which is charged each time they settle or “batch” their daily credit card transactions—a necessary process to ensure timely deposits and avoid higher processing rates. Interchange fees, set by card networks, are another key cost and can vary depending on the card type, transaction circumstances, and processing level (Level 1, 2, or 3).
Q: What are the benefits of using a merchant account for my business?
Having a merchant account helps a business increase its sales, improve financial management, become more efficient in processing payments, expand business operations, and deliver a better customer experience, as it provides a wider variety of payment options. Some merchant account providers also offer integration with accounting software and business checking accounts, which can further streamline financial management and cash flow. It also has the potential of saving up to 40% in processing costs for high-volume merchants by using payment structures like Stax’s that charge a flat membership fee instead of a cut from each sale.
Q: What are the key factors to consider when choosing a merchant account provider?
When choosing a merchant account provider, consider factors such as the types of payments they can handle (traditional, mobile, online, etc.), the types of businesses they serve, their customer support, PCI compliance, their pricing structure, and the associated fees for their services.
Additionally, look for providers that offer integration with your existing POS systems, accounting software, and support for payment methods like mobile wallets to streamline operations and improve efficiency.
Q: What happens after the merchant account is set up?
After the merchant account is set up, merchants can start using the required services to process payments. This starts with setting up merchant equipment and software and making payments for hardware costs and service fees. The provider typically provides comprehensive onboarding support to simplify the setup process.
