What Is a Merchant Account?
If you would like to be able to accept debit and credit card payments from your customers, one of the first things you will need is a merchant account. A merchant account is a special type of bank account that deposits funds from cleared card transactions into your business bank account rather than a separate account that holds your funds.
Once you are approved to open a merchant account it will come with unique identification number which is your merchant ID (MID) and all transactions processed through your merchant account will be labelled with your MID.
Choosing a Merchant Account Provider
There are currently over 60 merchant account providers in the UK with most high street banks offering merchant accounts as well as several independent sales organisations (ISOs) offering the same services but usually for lower fees. With all this choice how do you know which one will be a good fit for your business? First, you will need to set out the criteria for your selection and consider the following:
The type and nature of your business
Are you running a small business or a large one? How long has your business been around? What sort of financial state is it in? Is it categorised as high-risk, moderate-risk or low-risk? The answers to these questions will determine which providers will be more likely to give you a merchant account with a reasonable pricing structure. High-risk businesses, for instance, would be turned down by most merchant account providers but there are a few providers who specialise in dealing with these types of businesses.
The type of merchant account you will need
Which type of card transactions will you be making? Face-to-face, over the phone or by post, or online? There are providers who specialise in just online merchant accounts, but there are also those who can provide merchant accounts for all types of transactions.
Ease of application
The application process varies with most provider with most banks taking up to two weeks to process an application, while some ISOs, particularly the small ones, taking as little as two days to process one.
The services offered by most merchant account providers are not limited to just merchant accounts; they can also give you a full range of payment processing solutions, including card terminals, a virtual terminal or a payment gateway. That being said, you don’t have to choose the same provider for your merchant account and your payment processing service and it is often worth researching the different services of multiple providers. Some providers excel in some areas whilst are weaker or more expensive in others so it can often be beneficial to select a specialist for each element required – just make sure they all integrate easily.
Fees are, of course, one of the main factors to consider in choosing a merchant account provider. Different providers have different pricing structures, and this is where extensive research is essential. Some providers will charge setup and annual fees, while others won’t. Here are other fees that you will need to look into:
- Transaction Fee: This is normally set as a percentage for credit card transactions (between 0.5% and 4%) and as fixed fees for debit card ones (between 5p and 50p).
- Minimum Monthly Fee: Some providers will set a minimum monthly fee, which is the value of transactions you’ll need to make within a month. If, for instance, your minimum monthly fee is set at £50 and you only make £30 in card transactions for a particular month, your provider will charge you £20.
- Chargeback Fee: Chargebacks are the bane of the merchant services industry, as they could lead to losses for banks if it turns out that their merchant clients are engaged in unethical business practices. Thus, providers are stringent with their chargeback policies. If you get a chargeback, you will not only be charged the amount of transaction, but an extra fee as well. Paypal, for instance, charges £14 per chargeback.
- Early Termination Fee: It is very important to look into this if you’re going to be tied down to a contract with your provider. Contracts can last between one and three years, and a number of providers will make it difficult for their clients to get out of these contracts by charging exorbitant early termination fees.
Some of the Best UK Merchant Account Providers
Here are our choices for the best merchant account providers in the UK right now. Do keep in mind, however, that this is just a small percentage of UK providers and your choice should be determined by your own unique requirements.
Starting in 1989 as Streamline, Worldpay has grown into the largest Merchant acquirer in Europe and not offers a large variety of secure payment solutions for small to medium sized enterprises and large businesses. Having acquired Lynk, TrustMarque International, Bibit and Cardsave is process over 26 million transactions a day in over 120 currencies. They enable businesses to accept all major credit and debit cards and gives you a wide range of online and phone payment solutions, as well as static, portable and mobile card readers if you have a bricks-and-mortar shop. It has a UK-based support team with 24/7 availability and also provides free training to clients and their staff.
Lloyds Bank’s merchant account is ideal for businesses that make at least £1,000 a month in card payments. The application process takes between 10 and 15 days, and you will need to present your business plan, business bank account, website (if you’re applying for an internet merchant account), security compliance and turnover. Along with Cardnet, Lloyds offers a range of merchant services for its clients, including card terminals, virtual terminals and payment gateways, which come with online reporting tools and multi-currency processing abilities. You will also have a UK-based support team to help you out with any issues.
Card Cutters is a UK merchant services provider that has consistently received great feedback from its customers since it was established in 2009. It offers a range of services aimed at small to medium businesses, including card machine rental and online payment solutions. The company is known for its competitive fees, with no hidden charges. It is also renowned for its quick and friendly technical support and customer service teams.
Paymentsense is one of the largest merchant account providers in the UK and offers businesses different packages according to their needs. Setting up your account and payment system(s) is quick and you can start taking card payments in a matter of days. Paymentsense offers 24/7 customer support who will help out from the initial steps of choosing the right service package for your business to sorting out payment solutions. Its merchant account comes as a standard part of all its packages.
Your Next Step
Once you have a clear idea of what you want out of your merchant account, you can use our comparison form above to get immediate quotes from our recommended and highly trusted merchant account providers in the UK.