Are you a new small business owner? You probably have a lot to take care of, and you aren’t looking forward to sorting out your financial issues. However, you’re going to need to take care of two things as soon as possible: your merchant account and your business bank account. If you plan on taking credit and debit cards—and you absolutely should, unless you like turning down customers—you need to open a merchant account. You also need to open a business banking account, which will make your accounting process much easier.
What is a business bank account?
A business bank account is used to handle business-related expenses, such as rent and utilities. Business owners ought to open a business checking account that is separate from any personal accounts because it keeps you from mixing your personal funds with your business expenses. The last thing you want is the IRS on your back, and keeping things separate will lessen the chance.
If you use a business checking account instead of a personal account, you can allow employees to carry out tasks, such as mailing checks and making deposits. Business accounts tend to have better rules and lenient fees for business owners (as opposed to personal accounts), even though banks may change them at any time. While many banks will require a monthly minimum balance, others will allow you to simply maintain a certain amount of deposits or transactions every month. You may be able to maintain your account by enrolling in online banking. By opening a business bank account, you’re making a positive step towards growth: you’ll be able to accept credit and debit card payments, as long as you have a merchant account to process the transactions.
What is a merchant account?
When you open a merchant account, you are creating a relationship with a credit card processor. You need a merchant account to process credit card transactions. The credit card processor credits the money from the issuing bank to your business bank account. The credit card processor will provide everything you need to take cards; some will give you a POS terminal for free, some will let you lease it, while others allow you to buy it from them.
Applying for a merchant account is somewhat different from applying for a business bank account. Processors want to make sure that you’ll be a reliable client and not cause excessive losses. They will examine several things about you and your business. Do you have a low credit score? Is your business in a typically unreliable industry, such as gambling or travel? If so, then you may have difficulty finding someone who will provide you a merchant account. If you’ve ever lost credit card processing services due to breach of contract or fraud, then you’ll definitely be considered a high-risk merchant.
Featured Image: jmutax