Credit card merchant status: The facts

How to make sure business success is on the cards

There’s this myth about credit cards. It says ‘No credit card issuer will give you merchant status unless you have been trading for two years plus, and even then it will take forever to get the equipment to you’. But even if you have no trading history you can still register as a merchant.

There are a number of good reasons for becoming a credit card merchant. Prime among them has to be that if you don’t accept payment by card and your competition does, then there will be occasions on which your customers will buy elsewhere. In addition if you become a credit card merchant, you won’t have the problem of your customer running out of cash at the last minute and being unable to complete a purchase, and you won’t have to worry about cheque guarantee cards as many customers use debit cards instead of cheques now.

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How to Apply

The next decision to make is which credit cards you need to accept. The packages available are:

  • Block acceptance of Visa, Mastercard, Switch, Solo, JCB and Connect
  • American Express
  • Diners Club and other specialist offerings

The first of the above is the simplest to apply for – the bank at which you hold your business account will almost certainly be able to help, unless it’s one of the smaller, specialist banks that offer interest but fewer services on business accounts.

The main high street banks offer pretty much uniform services in terms of getting merchant status: NatWest’s Streamline, Barclays’ PDQ all work in the same way. To apply get in touch with your business bank. A NatWest spokesman confirms that the process can take up to two weeks and contrary to popular belief, you don’t need masses of trading history to get your machine. ‘For a start-up we’d want to see the business plan; if longer-established businesses have three years’ accounts then we’ll look at them, but if for some reason they don’t then we’ll look at projections.’

Of course that doesn’t mean acceptance is automatic. If you are in a high-risk business then the credit card company will use various means to ensure that fraud is kept to a minimum.

The most controversial method is chargebacks. If the card is found to be fraudulent then the money paid by the credit card company will be taken back from the merchant. The chargebacks can happen anytime up to six months after the transaction has taken place and it’s then up to the merchant to recover the fraudulently purchased goods.

If you can trace the miscreant and it’s in the UK then you stand a chance of recovering the money however if it’s abroad then you stand no chance, and you’ll pay for the goods and pay a chargeback fee from the credit card merchant.

A spokesman pointed to non-ABTA-registered travel agents, for example: ‘If the worst case scenario happens and someone gets to the airport and finds their tickets and bookings are not valid for some reason, we could be involved in paying people back so we’d have to look at that business.’ Electrical suppliers offering extremely long warranties would be another area of concern, he says. The other likely exclusions would be for anything illegal, of course.

The bank at which you hold your business account will almost certainly be able to help.


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