How Does a Merchant Account Work?

If your business needs to accept credit or debit card payments, you’ll need to open a merchant account.  Within this article, we’ll be answering questions such as “how does a merchant account work?” and “how long does it take to get a merchant account?”  We’ll also cover how you can start your merchant account and how much you’ll need to pay. If you’d like to know more, check out the rest of the article below.

How Do I Start a Merchant Account?

A merchant account works similarly to other bank accounts. Users store and collect payments via their accounts. Businesses usually open merchant accounts, so they can accept online payments. Merchant accounts allow companies to accept credit card and debit card payments online.

Terms and Procedures of Creating Merchant Account

When choosing a merchant account, you need to assess your business needs and determine which payment method you’ll use to accept cashless payments. Merchant account contracts can last for years, so you’ll need an agreement that benefits your business and provides the necessary information and equipment to accept payments.


The merchant account process involves several steps. These include:

  • Choose The Right Credit Card Brands

The first thing you need to do is choose which credit card brands you’ll accept. For example, some businesses may only need Visa and MasterCard. However, if you serve international clients or customers, you’ll need to open a merchant account that accepts other credit card brands popular in different parts of the world.

  • Understand Your Payment Model

Decide whether you’ll require one-time payments or recurring billing. Look for banks that support both options and identify the most favorable rates for each payment model.

  • Be Ready With Your Turnover Information

Banks will look at your turnover when deciding on their rates for your merchant account. Therefore, be ready with all necessary documents to prove your financial turnover for the past within the last few years.

  • Look For An Appropriate Bank

Businesses should open merchant accounts with local banks (in the same jurisdiction where you are registered) for the best offers on rates. offer the best rates. In addition, you should try opening a merchant account at a bank you have already used for your business finances; the prior relationship will increase the bank’s trust and lead to better conditions. If your business is international, find a global option that serves every country you operate in. If you’ve run the business for less than two years, you may want to use a Payment Service Provider, which increases your chance of getting a merchant account and reduces payment processing risks.

  • Prepare Your Website

Before setting up a merchant account, you’ll need a working website where the online payments occur. Businesses will need a unique domain and hosting. They should also ensure the website complies with MasterCard and Visa Requirements. A Payment Service Provider can help you with this process.

  • Gather All Necessary Documents

Businesses will also need various documents matching the bank’s requirements for a merchant account. These include a list of business activities such as,, tax returns, voided cheque for your checking account, financial statements, bank account and routing info, business plans, et cetera. Keep in mind: the exact documents required may vary depending on your bank.

  • Submit Your Application

Once you have performed the above steps, you’ll need to complete the application form. Once submitted, the bank will look at your supporting documents and application form and decide.

What Fees Will You Need to Pay?

Your business needs to pay a setup fee for a merchant account. They can also expect the following fees:

  • Interchange fees
  • Payment processing fees
  • Assessment fees
  • Monthly and decline fees

Process of Approving Your Merchant Account

So, how do you get approval for a merchant account?  Banks consider numerous things before approving your merchant account. These include:

  • How long you have been in business – a successful business can be more trusted than a new or high-risk business
  • Credit history – good credit leads to more favorable rates
  • Any previous account held with merchant account providers – well-maintained previous merchant accounts are a good indicator of how you’ll handle your new merchant accounts

Merchant accounts usually take between one to four weeks before they are approved. Each business is considered on its risks and merits.

How Do I Withdraw Money From My Merchant Account?

Credit card transactions to your merchant account are relatively straightforward.  When a customer purchases a product or service on your online website, their card processor relays the transaction on their network. The network then routes the transaction to the correct issuing bank. The issuing bank approves the payment and allows the transaction funds to go into your merchant account.


You may be wondering, “how do I receive money from a merchant account?” The merchant account provider sends your funds to the bank account provided during the application. Funds will appear in your bank account within two business days. Businesses can withdraw those funds by logging into their merchant account and following an on-screen withdrawal process.