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Requirements
for opening merchant accounts
Before getting into the details about
the requirements for opening a merchant
account, it is important to know the
basics account merchant accounts.
What are merchant accounts?
In simple words, merchant accounts
are a kind of financial arrangement
between a merchant and a financial
institution where the latter grants the
former a new credit line. Every time
business transactions are made, the
financial institution will transfer
after collecting the payment to the
savings account. The interchangeable and
processing costs will automatically get
deducted from the amount that is
deposited. In addition to this, the
merchant banks also submit requests to
the bank which has provided the customer
card for payments. The primary objective
of merchant accounts is to perform
business transactions proficiently and
completely.
Why does a merchant account need so
many safeguards and cross-checks?
Merchant accounts are typically
linked with a number of risks such as
liability risk, fraud risk and credit
risk. In order to reduce these risks,
many cross-checks and safeguards are
implemented. One will understand the
importance of these safety measures
after the unpredictability of the risks
will be understood.
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Credit risk – a credit risk is taken by
a merchant bank with respect to the
money that a merchant owes to the bank.
A merchant account is usually given to a
person with no credit or poor credit
rating. Hence, the risk taken by a bank
is considerably high.
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Fraud risk – If a trade is
business-oriented, then the chances for
the occurrence of a fraud is very high.
A typical instance of a fraud risk is
the transactions made by credit cards by
a credit card holder who is
unauthorized. Fraud risks are fully
preventable but unavoidable.
-
Contingent liability risk – A contingent
liability risk is considered the most
awful risk which could even force a
merchant to close his/her business. The
best instance of this type of risk is
when several consumers ask a merchant to
return their money. A contingent
liability risk is disastrous and
unforeseeable for any merchant.
When is a person eligible for a
merchant account?
If a merchant owns a high risk
business such as online pharmacy, video
gaming, etc. then there will be
difficulties in obtaining merchant
accounts. Moreover, the transaction fees
as well as the set-up fees are
exceptionally high.
What geographical requirements are
needed for the setting up of merchant
accounts in US?
Following are the geographical
requirements needed for setting up
merchant accounts in US:
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The business needs to be an American
corporation.
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The merchandise can be stored as well as
deported from America.
-
A valid postal address must be present
in America.
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The transactions of the business should
take place in American dollars.
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The bank guarantor must possess
authentic SSN and should not have a bad
credit rating.
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Finally, the server of the business
website should also be American-based.
In addition to the above
requirements, a business also needs to
be regulated by the state or federal
government and should also have a
business license. |
