Merchant Credit Card Status for Craftspeople

By Sylvia Landman

The following article on obtaining the ability to accept credit cards (known as Merchant Credit Card Status) was provided to Planet Patchwork by Sylvia Landman, a craftsperson, teacher, lecturer, and author with expertise in home-based crafts businesses.

This article is reprinted with her permission from The Crafts Report. Ms. Landman treats this subject in much greater detail in her book Crafting for Dollars, Turn Your Hobby Into Serious Cash, Prima Publishers, 1996.

Merchant credit status at a bank can be nearly unattainable by home-based crafters. New and seasoned craft professionals expect it to be easy but find that it's not at all like applying for a business license or a seller's permit.

Professional craft persons agree that customers paying by credit card, increase gross sales. Nonetheless, few of us will be able to sell merchandise via Visa or Mastercard.

I teach college classes which prepare hobbyists to become professional craftspeople in the marketplace. I tell each class that perhaps one in forty of them may succeed in acquiring credit card merchant status.

Recently, I invited our banker along with the Merchant Sales Representative for the San Francisco Bay Area to be guests in my class. Students asked them if I was unduly pessimistic stating that so few of them would gain credit card status from a bank. They stated that probably none of them would qualify! Here is why.

  1. Banks prefer store-fronts to home-based businesses.
  2. They prefer to deal only with clients with whom they have a long-term banking relationship.
  3. Usually, you must be in business for at least one year before becoming eligible for merchant credit card status.
  4. Credit managers want proven business and personal stability.
  5. A craft business must be legal within the community as to licenses, seller's permits, zoning variances, etc.
  6. Collateral such as certificates of deposit or savings accounts are not considered by Visa and some other card-issuing banks in deciding to grant merchant status.
  7. If you are taking the home office deduction, a bank officer may come to approve it.
  8. If you want to apply for merchant credit status, prepare to provide several documents to your banker such as;

Bankers provide this list not to hassle small business owners and craftspeople. Rather, it is their way to protect themselves and establish a firm business relationship as they do with any other business.

Banks must protect their own financial position. Disgruntled customers may charge back orders to the bank for up to seven years. Banks actually loan the merchant money temporarily. But, disputes or non-payments left by a merchant who goes out of business become the bank's responsibility for up to 180 days.

Even though my husband and I knew how difficult it is for home-based businesses to gain merchant credit status, we began the process for our mail-order entrepreneurial book business. We knew mail-order sales to be the least favored by banks. I expected the bank to reject us but felt the experience would be a valuable one for us and my students.

Much to my surprise, within three weeks, we were able to accept credit cards from our customers. Much of the credit goes to our local banker. She proved to us how valuable a good relationship with your banker is to a small business. She was helpful and supportive once she understood our needs.

She guided us and made suggestions along the way. She advocated for us as needed with our bank's head-office. She came to check out our home office and other business documents.

She explained that our being in business for many years served as stability. We had lived in the same home, in the same town for more than eighteen years. This is important to a bank. She checked each credit and personal reference we provided.

Most of all, she encouraged us every step along the way, explaining that the bank wanted our business though it was a mail-order business. She said the bank sincerely wants to help its clients with their business.

We learned there are several different credit-card authorization formats available from banks granting merchant credit card status. The two used most often by small businesses are terminal systems, and touch-tone 800 phone numbers. Another method growing in popularity makes use of your personal computer which reports directly to the bank.

Terminal systems cost about $300. The terminal plugs into a phone line to verify each customer's card at the point of sale.

Touch-tone systems work differently. First, fill out an authorized sales slip for your customer. Then, pass it through your imprinting machine which bears a plate with your merchant number to identify your business.

Next dial the 800 phone number your representative provides. An artificial computer voice asks you specific questions. You respond by pushing numbers on your touch-tone telephone. After providing all the information required, the voice will tell you whether the bank wishes to authorize the sale for that particular customer. If so, they provide an authorization number which you write at the top of the sales slip.

Deposit sales slips to your business account with your regular banking transactions. At the end of the month you will receive a monthly statement reflecting the sales made to your account resulting from credit card sales.

Remember that a percentage of each sale is due to the bank for their services. The amount may vary from 8% to 3%. If you must pay a higher percentage than you would like, the figure is negotiable after a time.

Keep your business account running smoothly. Never permit over-drafts for checks written with insufficient funds. The amount of your credit card sales and the way you handle the authorization process will also be a factor in reducing the percentage you must pay.

The process was an educational one for us and for many students and clients with whom I can share it. We are working to increase our credit-card sales. Best of all, we know we have a banker we trust and can turn to as our business grows.

First American Serial Rights to: THE CRAFTS REPORT, published in 1992 Rights reverted back to author for inclusion in her recent book, Crafting for Dollars, Turn Your Hobby Into Serious Cash, Prima Publishers, 1996.

Sylvia Landman
Certified Craft Designer, Society of Craft Designers, NQA Certified

If you find yourself left out in the cold on merchant status by your bank, Sylvia has provided the following contacts which may help a small, crafts-related businessperson obtain credit card privileges:


Where to Go When Banks Refuse To Give You Merchant Card Status

39899 Balentine Dr., Suite 125
Newark, CA 945560
(My first choice, ask for Joe Lewis and tell him I sent you)

42 Los Ranchitos Road #11
San Rafael, CA 94903
800 474-0870


Box 3744
Manhattan Beach, CA 90266
213 371-5615

1353 Wildwood Drive
Los Angeles, CA 90041
213 257-1818

3216 North Third St
Phoenix, AZ 85012
602 265-8040

Books About This Subject:

Merchant Status Report, ($6)
Write to: Rick Kerner,
3231 Forks St.
Easton, PA 18042
800 972-6664

How and Where to Get MasterCard/Visa for Your Home-Based Business (19.95)
World Trading Co.
9505 E. Vista
Hillsboro, MO 63050

Strategies for Getting Card Merchant At Your Bank ($27.95)
Write: John Cali
Great Western Pub. Co.
21244 Millwood Square
Sterling, VA 20165-7607


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