We have clearly (I think) indicated on our website that we can only provide credit card processing services to U.S.-based businesses. Yet, we keep getting inundated with inquiries from India, the U.K., Malaysia, Indonesia, the Netherlands, Romania, Vietnam and many other countries.
The reason we can’t work with foreign businesses is not that we don’t want to, we do, but that industry regulations only allow us to do so under certain very strict conditions. We have written on this topic before, but evidently we haven’t done a good job of it. So let me try and do it again in this post.
Requirements for Setting up a U.S. Merchant Account
In order for a merchant account application to be even reviewed, the following three conditions must be met:
- The applicant business must be either incorporated in the U.S. or registered with a “Doing Business As” (DBA) name in a U.S. city or town. Individuals cannot apply.
- The applicant business must have a physical U.S. address.
- The applicant must have an active account with a U.S. bank.
These are the three minimum requirements and there is no exception to the rule. The point is that, although the business owner does not have to be a U.S. citizen or permanent resident, the business itself must be a U.S. legal entity.
What Should a Foreign Business Do?
Full disclosure, I am not at all familiar with the local credit card processing rules in Europe, India or anywhere else outside of the U.S., so I can’t make any comments on whether or not the setting up of a merchant account in the U.S. is worth the trouble for foreign businesses.
Additionally, I will not discuss the various third-party options for accepting payments. You can contract with a U.S. company to process your transactions through their own merchant account or to run your entire sales process, including taking orders, shipping merchandise, providing customer service, etc. Such alternatives will no doubt work well for some businesses, but this is an entirely different type of service.
If a foreign business does decide to set up a dedicated merchant account in the U.S., it will need to be prepared to make a certain investment to achieve and maintain compliance with the above requirements.
There are many companies that can help you set up a business in a state like Nevada or Delaware and you can easily find them. You will need to have a registered agent in the state of incorporation and the company you hire can help you with that, as well as with the setting up of a bank account.
Once you have done all that, you can proceed with the application process.
The Takeaway: Dedicated Merchant Accounts Are not for All Foreign Businesses
The bottom line is that, unless you have already built a customer base in the U.S., a merchant account is probably not for you. A better option would be to use a third-party service until your credit card volumes grow to a level that justifies the switch to a dedicated service.
Additionally, if you operate a high-risk business, a third-party option will probably be the only one available to you. That is to say that, if you run an online pharmacy or something like that, don’t waste your time trying to set up a merchant account in the U.S., as you won’t get it.
Image credit: Bestpriceforsales.com.