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Accepting credit card payments has almost become a requirement for doing business. But the prospect of extracting money from a piece of plastic in your client’s wallet – or a string of ones and zeros on their phone – is intimidating.
A lot of information on this makes it more complicated than necessary – merchant accounts are just one example. Here’s how to accept credit card payments without a merchant account so you can avoid this unnecessary and costly step.
How does a merchant account work?
Traditionally, a company had to open a merchant account in order to accept credit card payments from customers. A merchant account is a special type of bank account that is used to hold your money after a credit card transaction has been made and while the credit card network is processing the transaction. Then the money will be deposited into your business account.
In the traditional model, you had to work with a merchant service provider or directly with a bank to open a merchant account and negotiate a – usually year-long – contract to pay monthly fees. Then you will be given the hardware required to process payments in-store or set up the software you need to pay online.
It’s all as complex and unnecessarily expensive as it sounds, so most new businesses skip this step and use an all-in-one payment service provider instead.
How to accept credit card payments without a merchant account
Without a merchant account, you can accept credit cards like many modern companies: with a payment service provider.
Payment Service Providers (PSPs) such as PayPal, Square, Stripe and Co. make this process much easier and in many cases cheaper than before.
PSPs work similarly to merchant accounts in that they accept and hold your money from credit card transactions, but you can log in and manage the account entirely online. Plus, they don’t usually charge monthly fees just to have an account, and they process transactions in addition to holding your money.
Accepting payments in-store without a merchant account
Modern point of sale (POS) systems like Square and Clover are easy to register and come with all of the hardware and software you need to process all transactions – cash and credit cards.
A simple system like this one has all of your personal retail business needs: point of sale (i.e. your ability to check out customers), a card reader, and a credit card payment processor.
They usually accept credit cards by swipe, chip reader or mobile payment reader (tap); Let customers authorize a transaction by entering a personal identification number (PIN) or by signing it on the screen; and offer the option of printing out a receipt or sending it by email.
Accepting online payments without a merchant account
The easiest way for any retailer to accept payments for an online business is through a payment service provider such as PayPal, Stripe, Square, or Shopify. You don’t have a terminal for customers to swipe a card and you need to integrate payment processing into your website. Payment service providers are the easiest way to do this.
Most modern website builders, including Squarespace, Kajabi, and Shopify, have built-in integrations with payment service providers. Integrations may be limited for some builders. So if you want access to a particular provider, check your options before starting your site.
If your website is not well integrated with payment service providers, you can still accept payments from your online store by linking to your payment account. Most payment providers give you the option of adding a Pay Now button on your website that guides customers through their payment process, so you can have a fairly seamless shopping experience – but you may need to do more work keeping track of your inventory and your orders.
Personal mobile payment processing
If you don’t have a shop window or a cash register – for example, if you sell goods at a farmers market or an art fair – you can still accept credit cards without any problems.
If you only use your mobile phone with a mobile payment processing app, you can enter a customer’s credit card information or attach a small card reader where they can swipe their card to be read by your phone.
Square is the original mobile payment processor and sets the standard for a lightweight, user-friendly system. Its card reader is a Scrabble tile-sized attachment that plugs into your headphone jack or Lightning connector to turn your smartphone into a POS on the go.
Frequently asked questions (FAQs)
Do you need a merchant account to accept credit cards?
No. You don’t have to open a separate, expensive merchant account to accept credit card payments. You can set up an account with a payment service provider such as PayPal, Stripe, Square, Shopify or Clover to have all the services you need for processing credit card payments in one place.
How can I accept credit card payments without a machine?
You can accept credit card payments online through payment service providers like PayPal, Stripe or Shopify if you have an online storefront. In person, you can set up a shop anywhere by downloading a point of sale app like Square. The processor allows you to accept cards by manually entering the number or by using a small attachment in your headphone jack to swipe cards.
Can I accept credit card payments without a store?
Anyone can set up an account with a payment service provider such as PayPal or Stripe; You don’t have to be a legal entity. These accounts allow you to accept credit card payments from anyone including friends, family, clients, and clients. You can use them to accept credit card payments online or through their mobile apps by sending a payment request link or by giving the payer your email address. When you receive payment for goods or services (as opposed to money from family or friends) you must pay a processing fee, usually a small percentage of the transaction.
What’s the cheapest way to get credit card payments?
The cheapest way to accept credit card payments for your business will depend on the nature of your business and the payment methods your customers use. Payment companies use different price structures for their services. For most small businesses, a payment service provider is the easiest and cheapest option. You pay a small fee per transaction, but you don’t have to worry about subscription fees or work with multiple service providers. Higher volume companies are likely to benefit from a more complex payment processing system.
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