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If you have a small business that accepts electronic payments, you need a merchant account. Learn about merchant account services, credit card processing, and how to find the best merchant service provider for your small business.

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What Are Merchant Account Services?

Merchant account services are banking services that allow you to 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.

woman paying her bill
Image courtesy of Blake Wisz on Unsplash

Credit card processing involves three stages: authorization, settlement, and funding. Think of an MSP as a facilitator between your bank account, the credit card companies, and the customer’s bank that issued the card. They enable you to accept electronic payments securely.

How Do You Get a Merchant Processing Account?

Follow these steps to start accepting credit card payments.

Step 1: Get your website ready

Most institutions require your website to meet minimum guidelines. For example, Visa sets the following criteria for merchant websites:

  • A comprehensive description of goods and services for sale.
  • Detailed customer service contact information.
  • An overview of your refund and cancellation policy.
  • Delivery policy, specifically any restrictions.
  • Your location.

On top of those basic requirements, your website should include information regarding when your customer’s card is charged and the security used to protect your customer’s financial data.

Step 2: Gather the relevant documentation

For most applications, you’ll need to provide an Employee Identification Number or Social Security number if you’re a sole proprietor. Other requirements include a business license.

You may also need to attach processing statements, such as the volume of transactions and refunds.

Step 3: Submit your application

Depending on the provider, you might be able to apply online within minutes.

A merchant services provider will screen your application, checking issues like your credit and past financial issues, like judgments. It’s best to disclose any financial challenges during your application.

A merchant services provider will evaluate your risk during the application. After all, a merchant services provider takes on a lot of liability. If you have a high volume of chargeback history, you may be assessed as a high-risk merchant.

Other factors in underwriting include the industry you’re in and your company’s longevity.

Step 4: Set up your merchant account services

Once you’re approved, you could be set up within a few days. In this phase, you’ll get the technologies you need to process credit card payments. This will range from payment gateways to credit card readers, depending on the services you need.

How Do You Choose a Merchant Service Provider?

When choosing an MSP, consider these factors:

  • Whether the company supports the type of transactions you want to accept, such as Android Pay, in-person, and online credit card transactions.
  • Transaction fees.
  • Costs associated with equipment rentals; some companies will provide you with basic equipment free of charge, while others charge rental fees for equipment such as scanners, receipt printers, and cash drawers.
  • Ease-of-use and whether you can integrate it into software you already use, such as accounting suites.
  • A virtual terminal that allows you to accept payments using a computer with internet access.
  • Waiting time before you receive your funds.
  • 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 Top Merchant Services Providers

Consider these leading merchant services providers:

Merchant services providerBest for:
#1 Chase for BusinessOnline stores, bricks and mortar stores, pop-up shops as you can accept payments online, in-store, or on-the-go
#2SquareSmall businesses as you can easily accept online or in-store payments
#3 QuickBooks/Intuit Merchant ServicesExisting Quickbooks customers as you can accept credit cards, debit cards, and bank transfers
#4 PayPalSimple payment processing; ideal if you and your clients already use PayPal as you can accept payments through multiple channels
#5 American Express Merchant ServicesPhysical stores as it has easy reporting and dispute resolution in case of chargebacks

1. Chase for Business

Chase for Business offers payment solutions that allow you to accept online, in-store, or on-the-go. Chase supports payments using all major debit and credit cards and provides you with online dashboards to manage your account.

Chase for Business

The pricing model begins at 2.60% + $0.10 flat rate charge per transaction. There are alternative options for those who handle a high volume of transactions.

2. Square

Popular with small business owners, Square is known for its online and in-person payment system.

Square integrates with a variety of e-commerce platforms including Shopify and BigCommerce. Unlike some providers, Square doesn’t charge monthly or setup fees.

Square landing page

Square charges 2.6% + $0.10 per transaction, though users with paid plans pay lower fees. Square provides reporting and analytics features, basic payroll functionality, and lines of credit.

3. QuickBooks

Already using QuickBooks to manage your accounting? Consider QuickBooks from Intuit Merchant Services.

You can accept credit cards, debit cards, and bank transfers. 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.

QuickBooks landing page

There are no monthly or setup fees, with per-transaction rates starting at 2.4% + $0.25 for swiped transactions. QuickBooks offers volume discounts.

4. PayPal

PayPal offers you more than just the ability to send and receive money online.

PayPal landing page

PayPal’s services for merchants include:

  • In-person payments.
  • Sending and collecting invoices.
  • Setting up custom checkout processes for your e-commerce store.
  • Collecting 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 2.99% + $0.49 per transaction for online payments and invoicing.

5. 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.

American Express landing page

Frequently Asked Questions About Merchant Account Services

What are merchant services?

Merchant services are a category of financial services for businesses. This term is frequently used for the processes and technology required to accept online and in-person debit or credit card payments, including from RFID (or “chip”) cards. It includes the use of security technologies like encryption and entails the payment of fees by the merchant for the processing of these transactions.

Merchant services can also refer to the selling (and using) point-of-sale (POS) terminals and equipment and related gift card or customer loyalty programs. The term is also used in conjunction with the processing of food stamps and other forms of Electronic Benefit Transfer (EBT).

What is a merchant account?

A merchant account is a bank account that enables you to accept electronic payments from debit and credit cards. Funds from card transactions are deposited into the merchant bank account first. Those funds are then transferred to your business’s bank account on a daily or weekly basis.

What is a high-risk merchant?

Merchants are classified as “low-risk” (normal risk) or “high-risk” based on several factors. For example, if you have an average monthly sales volume of over $20,000 and your average card transaction is over $500, you could be labeled high-risk. If you have a lot of chargebacks or sell to high-risk countries, that could also get you classified as high-risk.

Other factors that could get you labeled high-risk include whether you accept multiple currencies, sell seasonal products, or offer recurring subscription products.

What if my business doesn’t qualify for a merchant account?

You may not qualify for all merchant service providers if you own a business classified as a high-risk merchant. However, some MSPs cater to high-risk merchants. You can look for a vendor specializing in high-risk merchant accounts and set up your account with them.

How can I avoid merchant fees?

You can avoid merchant fees by opting for an MSP that doesn’t charge any credit card processing fees. Many MSPs offer no-fee credit card processing in the form of cash discounts.

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