Launching an online store will add the list of credentials of online as well as offline accounts. You will need a dedicated merchant account with the bank, registration details with the local government offices, online email account to streamline several business activities, and so on. From registering your domain to creating your ecommerce store & partnering with shipping service providers, there will be the need for an account at every stage.
It involves opening an account on your trade name, while the others can be on the name of an individual or that of your partners. It is always better to keep your business accounts distinct from the individual accounts. But, it is not compulsory to have it on your trade name.
The type of merchant account that you will need for your business will keep varying. The need for a business account also depends upon the constitution of your business. Let us help you solve this trouble by answering the common questions related to merchant accounts.
What Is a Merchant Account? Do I Need One Before I Start My Business?
A merchant account is the bank account through which you can receive payments from customers via different payment modes & options. Be it, direct transfer, credit card/ debit card/ net banking, UPI, or offline payment options; you will need a dedicated bank account. Even if you are using the digital payment wallets, you need to configure your number & integrate the bank account with the same.
A merchant account is an account that you set up with the payment gateway company by integrating your bank account. As a merchant, you sign an agreement with the payment gateway companies to use their platform & make your account eligible to accept payment via different payment modes. The platforms do charge percentage-wise/ fixed transaction fees on different ways of payment made via their platform.
Now, the question comes, what must be the type of the bank account you must have to connect your merchant account.
The type of bank account depends upon the constitution of your business. If you start your venture as a proprietor, you can use your savings bank accounts to receive the payment for your orders. Since you, an individual and your company, are considered as a single entity, you can handle your business transactions with your savings account. To avoid any confusion, it is always advised to keep a separate account for your personal use & that to deal with your business transactions.
However, if you decide to register your company with any other configuration, you need to open a dedicated bank account on the name of your company. Such an account will be the current account & most often, there is a minimum cash limit for the same.
You will definitely need a merchant account for your store before making it open to receive orders. Most, if not all, payment gateways ask for credit card credentials to open the merchant account for your business. Usually, they won’t deduct any amount from your card, unless otherwise, things go wrong.
The major requirement of a merchant account is to enable payment through your store via credit cards. People often use credit cards for online shopping, as they have a fair cash limit, and profitable discount deals are available from various banks.
How Can I Open A Bank Account For My Business?
The basic documentation for creating a merchant account on your trade name is standard. Nonetheless, there can be an addition of a few documents from country to country & bank to bank. The basic documents will be:
- Your ID proof
- Business registration details
- Business address proof
- PAN card or Social Identity Number
- Company’s PAN card (For all other company constitutions than proprietor)
- Passport size photographs + Signature
Before opening a current account for your business, don’t forget to check with your bank’s minimum balance norms.
What Factors Should I Consider Before Opening A Merchant Account?
Before opening your merchant account with any of the payment gateways, we recommend you to consider these factors:
- Type of cards: Count on the type of credit cards, your users often use, to make payment through your store. Customers often have Visa cards, but there can be other users with Master Cards, Platinum Cards, Rupay, or even others. The payment gateways often cover the frequently used credit cards, but only a few enable payment through rarely used options. If you don’t have much idea, you can check for the popular options & compare payment gateways based on these options.
- Payment model: When you sell the products through your store directly, the payment model is a one-time settlement. But, when you are offering product subscription packages through your store or selling services, you may have a recurring payment processing model for users. Different companies have different rates for such services when automated; you can check for these & choose the company with acceptable rates.
- Analyze your turnover: Some of the payment gateways have different commission fees for different companies with limitations of turnover. The more business you will give, the lesser will be the percentage of transaction fees. By taking a chance to analyze your overall turnover, you can make better decisions while creating your merchant account.
- Compare transaction rates: The transaction rates of payment gateways are different for different types of cards. You can compare their policies & transaction rates and the settlement period, before actually opening a merchant account with either of them.
In addition to these options, you must check with the platform/framework you create your website. If you opt for custom web designing, you have to create the account & complete the API integration from scratch. Otherwise, if you are using an ecommerce platform to create your merchant account, you can check with the payment gateways they are already partnered with or APIs supported by the platform.
You will surely not get access to API before creating the merchant account, but you can check it with the supporting documents to understand it. After comparing & selecting the right payment gateways, you can configure your merchant account directly with the partnered options. Based on the type of your merchant account, you can enable/disable different payment modes for your ecommerce store.
