Recently there’s been a lot of controversy and talk about the way merchant banks provide merchant accounts. You might have seen the article TechCrunch posted about Fabulis and the fallout from Citigroup suspending their account (http://techcrunch NULL.com/2010/02/25/does-citibank-suffer-from-homophobia-or-just-a-general-dislike-for-startups) for “nonexistent objectionable content”.

This highlights one of the major surprises that a lot of online businesses find out- merchant accounts are _not_ like personal bank accounts. As my co-founder Isaac has mentioned “I think of merchant accounts as special checking accounts because they really are special.  Special as in time consuming to open and full of headaches.” These headaches usually involve the major differences between online purchases and offline purchases.

Online transactions typically are services that do not include a physical exchange of good. As they are somewhat intangible, many merchant banks put these type of transactions as high risk and often request several years of payment history to prove you are a valid business (obviously if you’re a new startup, this is an issue).

What can you do?

The most important part is to choose a merchant account provider that understands online billing. Many of our Recurly users and colleagues have had great success with Braintree (http://www NULL.braintreepaymentsolutions NULL.com/) as they’re focused specifically on online business. We also have had good luck with Silicon Valley Bank (http://svb NULL.com/). We’ve gotten a lot of poisitive feedback from our EU users about Wirecard (http://www NULL.wirecard NULL.com/). Regardless of the merchant account, be sure to ask these questions:

• How much are you paying above interchange rates? (Interchange rates are the standard fees to run a credit card)
• What are the monthly minimums? Are there invoicing or statement fees?
• When do we have access to our funds? This can be a real issue when collection yearly subscriptions. Other times it matters if they require a minimum amount in your account (revenue equal to the past 30 days of transactions).

Please also see our post on how to choose a merchant account. If you have any questions we can help with, feel free to leave a comment or send us an email at hello@recurly.com (hello null@null recurly NULL.com)