Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our opinions or reviews. Learn how we make money.
Merchant accounts
Plan to accept debit and credit card payments? You’ll need one of these.
Merchant accounts allow medium to large businesses to accept online and in-person debit and credit card payments. But high fees, early termination penalties and other important details are hidden in the fine print.
Compare merchant services providers
What is a merchant account?
Merchant accounts allow businesses to accept debit and credit card payments. When a customer makes a payment, the funds are directed through the business’ merchant account. But you don’t access funds there — money is transferred to your business checking account in one to two days.
Think of it as an intermediary between your customers’ payment and when you get paid. Businesses pay for these services, with fees that depend on the provider and plan you choose.
Merchant accounts vs. payment service providers
Like merchant accounts, payment service providers (PSP) allow businesses to accept customer credit and debit card payments. But there are several differences that separate these services.
While traditional acquiring banks assign each business its own merchant account, PSPs like PayPal, Square and Stripe group all businesses in its service under a single umbrella account. And unlike traditional merchant accounts, PSPs seek to offer a one-stop-shop for processing services.
| Merchant accounts | Payment service providers | |
|---|---|---|
| What size business is it best for? | Medium to large businesses | Small businesses with a limited budget |
| Pricing structure | Tiered, interchange-plus or subscription | Flat-rate per transaction |
| Setup time | Up to a week | Same day |
| Reliability | Thorough underwriting reduces risk of account freezes | Large transactions could initiate an account hold |
| Contract required? | Sometimes | No |
| Features and services | Payment processing, dedicated account manager | Payment processing, hardware, payment gateway, add-on reporting and invoicing tools |
How to choose the right merchant account
Here’s how to narrow down the competition to select a merchant account provider:
- Pricing structure. The way you choose to pay fees for the merchant account depends on the size of your business and how many transactions you process. Consider a pricing structure that offers long-term savings.
- Contract length. Some providers require contracts for up to three years. Be wary of multiple-year contracts and automatic renewal clauses.
- Fees. Transaction fees are standard, but be on the lookout for early termination fees and liquidated damages that come when you switch providers.
- Reputation. Before you apply, investigate your provider’s online reputation with the Better Business Bureau and Trustpilot. Browse customer feedback and look for red flags that indicate potential issues down the road.
- Support. Will your account manager be available to troubleshoot on weekends? Ask your provider what to expect in terms of ongoing support once you’ve signed up.
How much does a merchant account cost?
Merchant accounts come with transaction fees for each credit or debit card purchase. Expect these other common fees:
- Application fee. Because of its strict underwriting process, application fees can cost up to $100.
- Setup fee. You could pay between $50 to $100 for your account to be set up.
Monthly fee. Monthly account service fees range from $10 to $99 monthly, while annual fees tend to top out at $300 annually. - Transaction fee. For each payment, expect fees 3% to 5% of the transaction.
- Cross-border fee. Accepting payments from customers outside the US result in a cross-border fee ranging from 0.05% to 1.5% of the transaction.
How to sign up for a merchant account
Once you’ve selected a provider, it’s time to get the application process rolling:
- Put together a business profile. Establishes credibility to a provider and should include transaction volume, average ticket price and how you plan to accept payments.
- Apply. While taking into account application fees, don’t be afraid to apply to multiple providers. You’ll have more wiggle opportunity to snag a competitive rate.
- Negotiate. The processing fees are often negotiable, so compare your options and be up front about what you’re looking for.
- Set up. Once you’ve established a rate you’re comfortable with, your provider schedules a date and time to set up your card processing terminals. If running an online business, ask your provider about any plug-ins you need to install to accept payments.
Is a merchant account different than a business checking account?
Don’t let the name fool you — merchant accounts share little in common with the traditional business checking account. And businesses need both to accept card payments from customers.
The main job of a merchant account is to temporarily hold deposited funds until they can be passed on to your business checking account.
A business checking account, on the other hand, accumulates funds while helping you monitor cash flow, access ATMs, earn rewards points and track business expenses.
Do I need a separate payment processing provider?
While a merchant account won’t process your payments for you, most are hosted by providers that bundle payment processing into their services. There’s a good chance that by signing up for a merchant account, you’ll be connected with a number of payment processing services to help facilitate customer transactions.
While some providers offer more than one processing service, businesses typically need more than one provider to handle customer transactions.
Frequently asked questions
Read more on this topic
-
Stripe competitors 3 Stripe alternatives that don’t need coding experience.
-
Contactless payment processors Contactless payments don’t require a signature or inputting a PIN.
-
Square alternatives 3 Square alternatives that combine point-of-sale and e-commerce features.
-
PayPal Here alternatives 3 payment provider alternatives to PayPal Here
-
Stripe vs. Braintree Compare pros, cons and reputation to make the right choice for your business.
-
Braintree review A payment processing and merchant account for developers, best for the digital marketplace.
-
Stripe vs. Square Stripe and Square are two payment processors, but one gives you a free online store.
-
Stripe vs. PayPal Here Stripe and PayPal Here are both popular payment processors, but for different types of transactions.
-
Paypal Here review What to consider before you sign up for PayPal’s mobile processing app.
-
CDGcommerce review Know what kind of features, prices and tech support to expect before you sign up.