How to Accept Credit Card Payments without a Merchant Account

Merchant accounts are established accounts between a business and banking partner which unlocks the ability for the business to accept multiple forms of payments including debit and credit cards, however whether you’re just starting your business or determining the benefits of opening a merchant account, there could be alternatives in your consideration.

Can You Accept Credit Card Payments Without a Merchant Account?

How to Accept In-Store Credit Card Payments Without a Merchant Account

While merchant accounts unlock the ability to accept credit card payments for businesses, in modern days there are alternatives. A payment facilitator, or PayFac, such as Stripe, acts as a master merchant account allowing users of the service to accept payment forms on their behalf. If you utilize Payfac, you will not need a merchant account to accept credit cards.

Unique to being in store, you will also need the hardware component like a card swiper to accept these credit card payments.

How to Accept Online Credit Card Payments Without a Merchant Account

Utilizing a Payfac again will allow the ability to accept credit card payments online. Some Payfacs like Stripe will allow you to send digital invoices where customers can enter the credit card information.

In other scenarios, like an ecommerce business, Shopify acts as a Payfac and allows customers to make purchases on your site via credit card, while Shopify will facilitate the transaction.

How to Accept Mobile Credit Card Payments Without a Merchant Account

Some Payfacs like Square will allow users to accept mobile credit card payments by typing in credit card information from your customers, or swiping their cards with a bluetooth connected device; processing the sale right from your phone.

Understanding Merchant Accounts and How They’re Used

While Payfacs are an alternative, businesses always have the option to set up a merchant account. A merchant account is a dedicated business account where sales are processed for a business and maintained by the merchant account provider, such as PayPal.

How Does a Merchant Account Work? 

Merchant accounts act as the bridge between a buyer's payment account and your business's checking account. When a transaction is processed, the buyer pays you as the seller, and the merchant account will hold the money and eventually deposit it to your business. 

Is It Hard to Get a Merchant Account?

There are a few requirements to getting a merchant account. You will need to prove that you are running a legitimate business and provide this with items such as a business checking account, ID verification, and potentially your business EIN. 

Pros and Cons of Having a Merchant Account

Merchant accounts can be seen as convenient, have reduced fees on transactions, and help track your businesses sales in one place as all transactions may pass through it, but it does not come without its downside. Working with a merchant account means that there is an entity that controls whether you receive your funds. For example if fraud or money laundering is detected, the merchant account provider could freeze your account or hold funds. 

Merchant Account vs Payment Gateway

The merchant account is the business account where funds are deposited from the customer and held until deposited into your businesses checking. A payment gateway takes the money out of your customers account and moves them into the merchant account. 

Merchant Account vs Business Bank Account

A merchant account is set up so that as a seller you can accept money from customers. This is different from a business bank account, which acts as a typical bank account in that you are able to pay debts, write checks, and transfer money more broadly. 

Merchant Account vs Payment Facilitator (PayFac)

A Payfac is a service that will allow you to accept payments from customers and utilize the payfacs merchant account to process payments into your business checking. A merchant account is where a business would set up their own account to complete these transactions. This could be thought of as establishing your own merchant account or borrowing one as a service.

Accepting Credit Card Payments Without a Merchant Account: Is It Right for You?

A Payfac or a merchant account can both accomplish the same task of accepting credit card payments, but which is right for your business? We will explore a few factors to consider next. 

What Are the Benefits of Accepting Credit Card Payments Without a Merchant Account? 

Without a merchant account, utilizing a Payfac to accept credit card payments can be a benefit in that the transactions may deposit faster to your checking account, you can still customize your invoice or payment processing workflows, and there is low friction in acceptance, meaning a payfac does not monitor as closely your activity.

What Are the Drawbacks of Benefits of Accepting Credit Card Payments Without a Merchant Account?

The biggest drawback may be in the high fees associated with utilizing a payfac, and potentially a limit, whether monthly or annually, of how much money you can accept utilizing these payment methods. 

Should My Business Accept Credit Card Payments Without a Merchant Account?

 It really depends on the volume of transactions you're dealing with. If you have a higher volume of transactions it may be best to use a merchant account and keep all transactions flowing through a single source of truth. 

Are Non-Merchant Accounts Less Secure?

While the transactions through a payfac are not monitored as heavily, meaning your account may not get locked for suspicion or having too many disputes, they are still secure from things like cyber risk.

What to Look for in a Non-Merchant Account Credit Card Payment Company

If you are looking to utilize a payfac to process transactions, first consider whether you need hardware (in person) to process transactions. This will narrow your search as some payfacs offer unique equipment to handle these transactions.

Next understand whether you will need customization, branding, or any unique features like placing a payment portal on a website.

Finally, compare fees associated and maximum amounts of transactions when making your final decision.

Want to Accept Credit Card Payments Without a Merchant Account? Here Are the Best Companies to Try! 

• Stripe - Stripe allows businesses to accept credit card payments in an easy manner, with quick set up and prices around $0.30 plus 2.9% of transaction amount. 
• Square Payments - Square is best known for its card reader, allowing businesses to accept credit card transactions in person and offers a variety of transactional tools such as personal and other business accounts. Prices are around $0.10 plus 2.6% of transaction amount. 
• BrainTree - A PayPal company, BrainTree is the Payfac behind businesses such as Uber. Offering lower costs than most PayFacs but has strict requirements to qualify and long approval lead times. 
• Adyen - Incorporates data and financial management into its suite of solutions. Prices are around $0.30 plus 2.9% of transaction amount.

What Types of Credit Card Payments Can I Accept With a Non- Merchant Account? 

In most cases you can accept most major credit card types with these popular payfacs, however, be sure to read the fine print on what fees are associated with each credit card type. Some payfacs may have  a flat rate while others vary in rate by credit card.

How to Reduce Credit Card Payment Processing Fees 

One way to reduce credit card fees would be to utilize a merchant account over a payfac which offers lower transaction fees for your businesses sales. You could also limit which credit card types you accept depending on the fees associated, for example not accepting American Express as a form of payment.

What Security Measures Should I Put in Place to Reduce Fraud? 

There are a few ways which you could reduce fraud when accepting credit card payments. You can start by only accepting payments from an authorized user; be sure to check the name on the credit card before accepting.

Be sure to never accept a damaged card, it is possible that a defaced card has been altered and the chip could be from a different card. Finally, if you have been wrongly charged back, fight the charge and provide the documentation to prove the sale was real to the bank.