Can you take card payments without a merchant account?

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> What is a merchant account?
> How-to take card payments with a merchant account
> Taking card payments without a merchant account
> The advantages and disadvantages of taking card payments with a merchant account
> The advantages and disadvantages of taking card payments without a merchant account
> How can I accept payments online without a merchant account?
> Getting started

What is a merchant account?

A merchant account is a type of bank account that lets you process credit and debit card payments face-to-face, online or over the phone. Essentially, it holds the funds from your customer’s card payment until it’s authorised. Once this happens, the amount can be transferred into your business bank account.

Taking card payments without a merchant account

If you don’t have your own merchant account, you can still process card payments using a payment facilitator service (also known as an aggregated merchant account). It’s still technically a merchant account, but not an individual one, so you don’t need to apply and be approved for your own merchant account and accompanying merchant identification number (MID).

Instead, many different businesses will all process their transactions through one merchant account. This is typical of services such as Paypal. However, you will more than likely experience a longer settlement period and higher fees per transaction.

The advantages and disadvantages of taking card payments with a merchant account

Transaction limitations

If you want flexibility in terms of the number of transactions you can process or the value of those transactions, a merchant account could be your best bet. In contrast, payment facilitators usually have volume limits on how many sales you can process in a given timeframe.

Processing fees

Merchant service providers can tailor card processing plans and rates to your own business’ needs. So, if you process a lot of transactions, this option can often result in better value for money. Aggregated merchant accounts charge much higher fees per transaction, but if your level of sales tends to be low, a flat rate per transaction might make more financial sense.

Sign-up process

Applying for a merchant account isn’t difficult as such, but it does require more information and takes a little longer to approve than it would for a payment facilitator.

Customer support

Merchant account providers usually offer comprehensive customer support in the form of set-up assistance and troubleshooting via phone, email and live chat. Payment facilitators, on the other hand, tend to offer email and online support only, because they’re serving so many merchants.

The advantages and disadvantages of taking card payments without a merchant account

Transaction limitations

Payment facilitators often limit the volume of transactions you can process in a specific time period. So, if you want greater flexibility – perhaps even to be able to handle unlimited transactions – a merchant account is your best option.

Processing fees

With a payment facilitator, transaction costs tend to be set at a flat rate. This simplifies what you’ll pay, but you might find it leaves you worse off financially when compared to a merchant account. For example, with a payment facilitator, you’ll usually pay the same fees per transaction, regardless of how many sales you process. This can be good news if you don’t handle many transactions. But if you do, it might be worth considering a merchant account because they usually offer flexible plans and savings for higher-volume merchants.

Sign-up process

Generally speaking, payment facilitator service providers offer a more straightforward, faster sign-up process when compared to individual merchant accounts, because you don’t need to be approved for your own MID.

Customer support

Because they serve so many merchants, payment facilitators typically only offer email or online customer support. For merchant accounts, the level of support tends to be more comprehensive.