Accept Credit Cards Without a Merchant Account

Accepting credit card payments can be a challenge for new businesses and entrepreneurs with poor credit histories. Most traditional credit card merchant account providers will either deny the business an account or make account fees cost-prohibitive. However, business owners who are judged as a credit risk can often accept credit cards without a merchant account by enrolling with a third-party credit card processor or a third-party merchant. These third-party merchants allow you to process customer purchases through an online payment portal.

Steps

Researching Third-Party Merchants

  1. Understand how a third-party merchant works. A third-party merchant is a company that accepts credit card payments on your behalf for a processing fee. The merchant will check the card, process it, and send you a monthly payment for the amount you are owed. The merchant does most of the work for you, allowing you to focus on developing your products, services and customers.[1][2]
    • If you use a reputable third-party merchant, your customers are more likely to buy goods from you online if they know their credit card information will be secure and safe. This is why it is important that you do your research and look for a merchant that is trusted by business owners and consumers.
    • Credit card issuers, like MasterCard, Visa, Discover, and American Express, will also charge a fee for the use of their card in addition to the processing fees by the third-party merchants.
  2. Be aware of the pros and cons of using a third-party merchant. A third-party merchant is a good option for businesses who do not want to have to pay high upfront fees for processing software and computer hardware to run transactions. Many small businesses who process less than $1000 in transactions a month and want to have the option of running online payments as well as international sales will opt for a third-party merchant. Possibly the biggest benefit of a third-party merchant is that many third-party merchants do not require credit checks, making them very appealing to businesses with low credit scores or poor credit histories.[3]
    • One of the biggest disadvantages of using a third-party merchant is that most merchants charge a higher percentage for each transaction than if you have your own online merchant account. This is why it may be useful to view third-party merchants as a stepping stone for your company to help you get started and set up. Though you will initially pay higher setup fees and and software fees, having your own merchant account might be a better investment in the long term, especially if you can maintain a good credit score.[2]
  3. Look into several of the top third-party merchants. As third-party merchants become more popular, the list of providers continues to grow. There are several third-party merchants that are more used than others. You should research several different merchants to find the one that is best for your business. Most of these merchants allow you to sell products in person to customers at a brick-and-mortar location and online through an online store. Several top third-party merchants include:[4][3]
    • PayPal Here: This is perhaps one of the most popular options for a third-party merchant. It is managed through the online-payment service PayPal. You use PayPal Here by attaching a small blue triangle to your iPhone, iPad, or Android phone. You can also use PayPal Here through an app on your computer. The funds are either deposited into your PayPal account directly or on a special Debit MasterCard account. Customers can pay you by credit card or with their PayPal account.
    • Square: This third-party merchant is also popular with online businesses and brick-and-mortar retail businesses. You use it by attaching a small white square to your iPhone, iPad, or Android phone or through a Square app on your computer. Funds are then transferred nightly into your business checking account. Customers can pay by credit card or through their phone.
    • Intuit GoPayment: This is another option that works by attaching a grey bar on your iPhone, iPad, iPod Touch, or Android phone. The funds are then transferred nightly into your business checking account. However, there is currently no system for customers who want to pay using their phone. This option is good for businesses who use QuickBooks, as transactions can be downloaded through GoPayment into QuickBooks software.
    • PayByWeb: This merchant is popular for its ability to support several different payment methods, from credit cards to checks by phone and online payments. You can sell products internationally to US and non-US customers, but it only supports US dollars.
    • A complete list of third-party merchant providers can be found online. Try looking for it on any of the major credit card issuers' websites, like that of American Express or Visa.[3]

Comparing Services and Fees

  1. Factor in set up fees. You should evaluate at least two to three different third-party merchants to determine which merchant will work best for your business. Start by looking at any start up fees the merchant charges for use of their service. Most of the popular third-party merchants, such as PayPal Here or Square, have no setup fees. Some third-party merchants charge a very small setup fee, around $40-$50.[3]
  2. Compare transaction fees. Transaction fees are the fees charged for each completed transaction. Most third-party merchants will take a low percentage of the total transaction amount as their transaction fee. Some third-party merchants also have a low per-transaction fee that is charged on top of the percentage fee. You should look at the listed transaction fees for each third-party merchant and determine what you can afford to pay for each transaction.[3]
    • For example, PayPal charges a transaction fee of 1.9% - 2.9% of the transaction total, plus $0.30 per transaction. If your business tends to process lots of transactions every day and you want the lowest rate available, you may go for this option.
  3. Check the reserve percentage. Some third-party merchants will put a temporary hold on 5-10% of your transaction revenue. This will act as a safeguard against any returned items or charge backs due to the reversal of a charge or a transaction. You should ask the third-party merchant about their reserve percentage, if any. You may want a third-party merchant that does not require a reserve percentage so you have access to your total transaction revenue at all times.[3]
    • If a charge is reversed, the merchant is likely to offset returns against current payments or bill the seller.
  4. Look at the methods of payment accepted by the merchants. Most merchants will process payments through in-person transactions and online transactions. But some merchants will also process transactions over the phone, by fax, or by mail.[3]
    • You should also look into the payment types that are supported by the third-party merchant. You may be looking for a merchant who will support all major credit card networks (Visa, Mastercard, Discover, American Express), as well as online payments. Note that some of these credit card networks may charge higher fees than others, even when processed through the same third-party merchant.
    • Some merchants may also access checks by phone, where the customer takes a picture of a check on their phone and it is processed through their bank’s app as a form of payment.
  5. Note any restrictions or limitations. The third-party merchant should list any restrictions or limitations up front. There may be restrictions on whether the merchant will handle only “tangible,” or physical, products. There may also be limitations on how much money you can process through the service: you may be limited to a minimum amount and a maximum amount each month.[3]
    • Most merchants can handle both tangible products and intangible products, as well as online products and services. But you should make sure the merchant can process both types if you plan to sell products in store and online.

Using the Third-Party Merchant

  1. Attach the processing chip to your smart phone. If you plan to use the third-party merchant to process in person transactions, you will receive a processing chip from the merchant that you can attach to your smart phone. The processing chip usually slides right onto the front of your smart phone. You will then slide the customer’s credit card through the chip and process transactions this way. This option is ideal for businesses who do small transactions throughout the day at a small storefront or market-style booth.[4]
  2. Set up the processing app on your business computer. If your business has a brick-and-mortar location that tends to run a high number of transactions throughout the day, you may opt for using your business computer to run transactions. You can download and set up the merchant’s processing app on your business computer. You can then use the app, in tandem with the processing chip, to run transactions through the merchant service.[4]
  3. Add an order form or a shopping cart on your website. If you are running an online store, you should put an order form or shopping cart on your site to process transactions through the merchant. Each merchant will have their own method for doing this. They may also provide premade forms that you can place on your website and customize for your business. Talk to your chosen merchant about setting up this option on your online site.[1]
  4. Troubleshoot any issues with the third-party merchant. Most third-party merchants offer technical support for any issues or problems you may have with their service. You should get in contact with the merchant if you encounter any glitches with their service, especially if you have never used a third-party merchant before. They should be able to troubleshoot the issues with you to ensure their service works as it is supposed to and supports your business needs.



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Sources and Citations

  1. ↑ 1.0 1.1 http://www.thesitewizard.com/archive/creditcards.shtml
  2. ↑ 2.0 2.1 https://service.futurequest.net/index.php?/Knowledgebase/Article/View/37/17/accept-credit-cards-without-a-merchant-account
  3. ↑ 3.0 3.1 3.2 3.3 3.4 3.5 3.6 3.7 http://www.spirecast.com/accept-credit-cards-merchant-account/
  4. ↑ 4.0 4.1 4.2 http://smallbizsurvival.com/2013/10/alternative-ways-to-take-credit-cards-ditch-your-merchant-account.html
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