Last Updated on by
If you’re a small business accepting electronic payments, you need a merchant account.
Merchant accounts are bank accounts for businesses that allow you to accept credit or debit card payments. Now, consider that customers want to pay for online purchases with a credit card.
Electronic payments make it easier to do business with you. But these days there are so many options, and finding the right merchant account provider can be a daunting task. You need to make sure you can accept your customers’ preferred method of payment. But, you must prioritize security, too.
Here we’ll cover everything you need to know about merchant account services and how to find the best match for your small business.
- What Are Merchant Services?
- The Top Merchant Services Providers
- Merchant Services Provider Comparison
- Finding the Right Merchant Services Provider
- Merchant Services: Frequently Asked Questions
What Are Merchant Services?
Merchant account services are banking services that let you process payments via electronic methods.
That includes credit cards, debit cards, and mobile payments. On top of that, merchant services cover the software you use and the hardware you need to facilitate electronic transactions. And a merchant services provider (MSP) is the company that makes all of this possible.
To give you a better idea of why you’d need a merchant account, let’s break down a typical credit card transaction:
- Your customer initiates a payment; this can be done via your shopping cart (online) or by swiping their card (in person)
- Your shopping cart or point-of-sale terminal requests authorization for payment from the payment processor
- The payment processor sends relevant transaction information to the credit card company (e.g., Visa, Discover, MasterCard, American Express)
- The credit card company then passes the transaction information to the bank that issued the card
- The bank then approves or declines the transaction based on the status of the customer account, and this information is returned to you
Think of an MSP as a facilitator between your bank account, the credit card companies, and the customer’s bank (who issued the card). They let you accept electronic payments securely.
How to Choose a Merchant Service Provider
When it comes to choosing a merchant service provider (MSP), there are several things to consider:
- Whether the company supports the type of transactions you want to accept (e.g., Apple Pay or Android Pay in addition to the major credit cards, in-person point-of-sale terminals)
- Payment fees (e.g., different fees for keyed-in transactions vs. swiped transactions)
- Costs associated with equipment rentals; some companies (e.g., Square) will provide you basic equipment free of charge, while others charge rental fees for anything you use (scanners, receipt printers, cash drawers, etc.)
- How much the MSP charges in terms of transaction fees
- Ease-of-use and whether you can integrate it into software (e.g., accounting suites) you already have
- Waiting time before you receive your funds; you typically do not get paid immediately after the customer has paid
- PCI Compliance to keep your clients’ financial data safe
- Reporting and analytics features so you can easily see your monetary inflows or send the data elsewhere for visualization
The specific feature set that is right for you depends on the needs of your business. But let these tips guide you as you seek the best MSP.
The Top Merchant Services Providers
Finding the right merchant service provider can be overwhelming, so we have provided brief reviews of some of the best MSPs in business today.
Chase for Business
Chase for Business offers solutions that allow you to accept payments online, in-store, or on-the-go (e.g., pop-ups, ad hoc markets, etc.). Chase supports payments using all major debit and credit cards and provides you with online dashboards to manage your account.
Fees begin at 2.90% + $0.25 flat rate charge per transaction. There are alternative options for those who handle a high volume of transactions.
Popular with small businesses, Square is known for its Apple-based payments system. It allows you to accept all types of payments in-person and online. Square integrates with a variety of e-commerce platforms like Shopify and BigCommerce. Unlike some providers, Square doesn’t charge monthly or setup fees.
Square charges 2.9% + $0.30 per transaction, though users with paid plans pay lower fees. Square provides reporting and analytics features, basic payroll functionality, and lines of credit.
eMerchant is a full-service payment processing system that supports both online and brick-and-mortar businesses.
In addition to one-time payments, eMerchant supports recurring billing and multi-currency transactions. eMerchant charges a monthly fee that ranges between $10-$49, in addition to per-transaction fees ranging from 1-4% + $0.25.
Bank of America Merchant Services
Bank of America Merchant Services lets small and large businesses accept point-of-sale payments using a variety of terminal types.
Bank of America is also an e-commerce payment gateway for online stores. Fees are not published, but current customers indicate that there are additional PCI compliance fees, as well as varying per-transaction fees based on the transaction type (e.g., payments from swiped cards do not cost as much as keyed-in transactions).
American Express Merchant Services
American Express Merchant Services comes with easy reporting and dispute resolution in case of chargebacks. For physical stores, packages offer complimentary signs and supplies (including stickers and logos).
You also get access to 24/7 customer support.
First Data, now known as Fiserv, is the company behind the Clover point-of-sale systems for small businesses. The company also offers support for building loyalty and rewards programs, gift cards, and e-commerce transactions.
First Data’s Payeezy solution allows you to accept any credit card, PayPal, and electronic checks in multiple currencies. Fees start at 2.90% + $0.30.
Already using QuickBooks to manage your accounting? Consider QuickBooks from Intuit Merchant Services.
You can accept credit cards, debit cards, and bank transfers (and for qualifying accounts, the company also offers next-day deposits). You can also use QuickBooks to send invoices, key-in your customers’ credit and debit cards, accept recurring payments, or take advantage of the on-the-go card reader.
There are no monthly or setup fees, with per-transaction rates starting at 1% for bank transfers and $0.25 + 2.4% for swiped transactions. QuickBooks offers discounts for those handling more than $7500 per month.
Wells Fargo offers support for both in-person and online payments via electronic payments (e.g., Apple, Android Pay) and all major credit cards. Wells Fargo utilizes the Clover POS systems.
Fees are $9.95/month for each in-person location and $24.95 for online stores. The monthly fees are in addition to per-transaction fees that start at 2.5% + $0.15.
PayPal offers you more than just the ability to send and receive money online.
PayPal’s services for merchants include:
- In-person payments
- Send and collect on invoices
- Set up custom checkout processes for your e-commerce store
- Collect payments from customers in more than 200 countries
- Access to shipping integration and other merchant lending services.
PayPal’s fees vary based on the services you are using but begin at 2.9% + $0.30 per transaction for online payments and invoicing.
Merchant Services Provider Comparison
If you’re a small business, you need to pay attention to the costs that come with processing transactions. Many providers will charge a per-transaction fee on top of a monthly fee. Not all providers provide transparent pricing, either.
Some, like Square, will present the cost structure clearly. Square also doesn’t charge setup, monthly, or PCI fees. Other providers may offer special discounts. You can, for example, get 100 free monthly transactions with Chase.
Merchant Services Provider Best for... Chase for Business Online stores, bricks and mortar stores, pop-up shops Square Small businesses - online or instore eMerchant Online and physical stores; recurring payments and multiple currencies Bank of America Merchant Services POS payments American Express Merchant Services Physical stores First Data Loyalty programs, processing checks in multiple currencies QuickBooks/Intuit Merchant Services Existing Quickbooks customers Wells Fargo Basic merchant services, e.g., accepting payments online and in-store PayPal Simple payment processing; ideal if you and your clients already use PayPal
Finding the Right Merchant Services Provider
There are a few merchant service providers for you to consider. However, not all options are created equal. The needs of your business will influence the final list of companies you evaluate.
To help you determine the best MSP, consider the following questions:
- Are you a strictly e-commerce business?
- Do you need point-of-sale terminals (either ad hoc or a permanent station)?
- How many transactions do you process per month?
- How much revenue do you accept via electronic payment methods?
The merchant service provider should take security seriously and safeguard both you and your customer’s information. That’s why you should look into the security practices of the company you are considering and verify that they are adequate.
Merchant Services: Frequently Asked Questions
Here are some common queries about MSPs.
What are merchant services?
Merchant services is a category of financial services for businesses. It covers everything you need to accept electronic payments from your customers. This includes payment gateways and hardware like point-of-sales systems.
What is a merchant account?
A merchant account is an account your business has with a bank or payment processor, and it lets you accept electronic payments. When a customer pays for your product or service, the funds go into the merchant account and are then transferred into your business bank account.
What is a high-risk merchant?
If you’ve been labeled a high-risk merchant, you may struggle to find a merchant services account provider. Businesses typically qualify as high-risk merchants if they have a high rate of chargebacks, bad personal credit, recurring billing, and high sales volumes. Consider your options carefully. You could end up paying excessive rates.