If you are in a rush to set up a merchant account, you might discover companies in your search results that advertise instant merchant accounts. If you do, then remember the adage that if it sounds too good to be true, it is too good to be true.
Instant merchant accounts and free merchant accounts don’t exist; they are simply a scam to grab your attention with the longer term aim of grabbing your cash.
What are instant merchant accounts?
Instant merchant accounts are accounts that purport to provide businesses with the facility to process credit card payments immediately. While it usually takes at least two weeks to set up a merchant account and requires a credit check on your business and due diligence on your accounts and business plan, an instant merchant account can be set up quickly.
How can they provide instant setup?
The secret is that don’t provide you with full merchant account. Instead they provide you with the equivalent of a virtual card payment terminal on which you can process credit and debit card payments.
To start the process you simply sign up for an account and provide your bank and credit card details. You are provided with log-in details so that you can access a virtual terminal to process your customers card payments. After you have done so, and they have been authorised, your so-called instant merchant account is credited with the payment. Eventually this payment minus the fees is transferred to your bank account.
What’s the catch?
There are several. It is expensive; the fees can be exorbitant. There is very little protection; there is a realistic chance that you will never see the money, and if you do it could take several weeks before the funds are transferred to your account.
Why you should avoid instant merchant accounts
Never trust any organisation offering an instant merchant account. Although you might be able to process credit card payments without going through the usual procedures of setting up a bone fide merchant account, doing so will be expensive and you might have to wait some time before the transactions are settled in your bank account.
Such systems are open to abuse, and fraud is all too common. For instance your customer could use a stolen or cloned credit card, and it might not be detected. Once the payment is authorised, and you have delivered the goods and services, you would be faced with a chargeback and a chargeback fee. This could result in your account being frozen and your funds withheld.
What are the alternatives?
There is no short-cut to setting up a merchant account, but by ensuring that you are able to supply all the required information in a timely fashion will speed up the application process. It is probably better to avoid the high street banks as their vetting procedures tend to be protracted. Providers such as Sage Pay tend to be more efficient.
If you are really in a hurry; then solutions such as PayPal and Amazon Payments can be put in place enabling you to take credit card payments without the need to set up a merchant account. The fees might be a little higher than a regular merchant account, but cheaper and less risky than an instant one.