Should You Upgrade To A Merchant Account?
If you’re a small business owner, you’re probably taking payments through a pre-made shopping cart that works in tandem with PayPal. This is a great way to get your business started, but as your business grows, you’re going to want to consider looking into something a little more personalized. That orange-and-blue “Buy with PayPal” button does reassure your customers that they are working with a trusted payment service, but it also makes your business look like it’s still getting off the ground.
Instead, you may want to upgrade to a merchant account. The term “merchant account” often sounds unfamiliar to many entrepreneurs, so here’s what it means:
With a merchant account, you work with a bank to set up your business’s ability to accept debit and credit card payments. PayPal, for example, has already done the work of setting up a merchant account for a bank; that is why it is able to allow you to accept debit and credit card payments on its behalf. Getting a merchant account of your own gives your business a bit more freedom, and is a good next step for a small business that’s growing up.
Getting a merchant account is only the first step in improving your business’s checkout system. Since your shopping cart will no longer be associated with PayPal, you will need to code and design your own custom shopping cart to reflect your new merchant account. If you do not currently have the coding experience to handle this job, it’s time to hire a freelancer. Make sure you put as much attention into the design as you do into the code; the visual aspects of your shopping cart are what’s going to influence your potential customer’s decision to make a purchase.
Some businesses, such as travel businesses and online tobacco businesses, are considered high risk businesses. These businesses either operate within a high risk industry or have a high rate of turnover within their staff. If you have a business that falls within the high risk category, you may find it difficult to form a traditional merchant account with a bank.
However, there are high risk merchant accounts specifically designed for businesses that fall within the high risk category. These merchant accounts let you process debit and credit card payments even though your business is technically “high risk.” If you are concerned about whether your business falls in to the high risk category — and many online businesses do — talk to a bank or consult a high risk merchant account company.
Is there ever any reason not to get a merchant account? The only good reason not to take this next step is if your business is currently involved in another project, such as holiday sales or a new product launch, that is taking all of your time and attention. Keep in mind that these are reasons to postpone the process of getting a merchant account, not to put it off indefinitely.
You should start thinking about a merchant account around the time that your business is making enough money to support itself and to pay you — and any employees — a small salary. Remember, you are going to want to convince a bank that your business is stable and functional. If you are still in the early stages of a business, where your profits are not yet covering your expenses, you’re not yet ready for a merchant account; stick with PayPal for now and focus your efforts on growing your business.
Moving from a third-party payment service to a merchant account is one of the steps in taking your small business from its early stages into its prime. Consider it a significant accomplishment, and don’t forget to congratulate yourself on managing a successful business.
Have you switched over to a merchant account? Considering making the move in the future? Let us know!
Young Upstarts is a business and technology blog that champions new ideas, innovation and entrepreneurship. It focuses on highlighting young people and small businesses, celebrating their vision and role in changing the world with their ideas, products and services.