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Accepting credit card payments has become almost a requirement of doing business. But the prospect of squeezing money out of a piece of plastic in your client’s wallet or a string of ones and zeros in their phone is daunting.
Lots of information on how to do this makes things more complicated than they need to be – merchant accounts are just one example. Here’s how to accept credit card payments without a merchant account, to avoid this unnecessary and costly step.
How does a merchant account work?
Traditionally, a business had to open a merchant account to accept credit card payments from customers. A merchant account is a special type of bank account that holds your money after a credit card transaction is executed and while the credit card network is processing the transaction. After that, the money is deposited into your business bank account.
With 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 contract, usually for a year, to pay a monthly fee. Next, you will get the hardware you need to process in-store payments or set up the software you need to process payments online.
This is 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 businesses do: with a payment service provider.
Payment Service Providers (PSPs) like PayPal, Square, Stripe, and others are making this process much easier and, in many cases, cheaper than before.
PSPs work the same as merchant accounts in that they accept and hold your money from credit card transactions, but you can register and manage the account entirely online. Plus, they usually don’t charge a monthly fee just for having an account, and they process transactions in addition to holding your money.
Accept in-store payments without a merchant account
Modern point of sale (POS) systems like Square and Clover are easy to register and come with all the hardware and software you need to process all transactions – cash and credit cards.
A simple system like this covers all of your in-person retail needs: point of sale (i.e. your ability to verify customers), card reader, and card payment processor credit.
They generally accept credit cards by swipe, chip reader or mobile payment reader (tap); allow customers to authorize a transaction by entering a personal identification number (PIN) or signing on the screen; and offer the option to print or email a receipt.
Accept online payments without a merchant account
The easiest way for a retailer to accept payments for an online business is through a payment service provider like 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. The easiest way to do this is through payment service providers.
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 consider your options before getting started on your site in case you want to access a specific vendor.
If your website doesn’t integrate well with payment service providers, you can still accept payments from your online storefront by logging into your payment account. Most payment providers give you the option of adding a ‘pay now’ button on your website that directs customers through their checkout process, so that you can provide a fairly seamless shopping experience, but you may need to do more work to stay on top of your inventory and orders.
In-person mobile payment processing
If you don’t have a storefront or cash register, for example if you sell products at a farmer’s market or art fair, you can still easily accept credit cards.
Using only your mobile phone with a mobile payment processor 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 it sets the standard for a lightweight, easy-to-use system. Its card reader is a Scrabble slab-sized attachment that connects to your headphone jack or Lightning connector to turn your smartphone into a mobile point of sale.
Frequently Asked Questions (FAQ)
Do you have to have a merchant account to accept credit cards?
No. You don’t need to open a separate and expensive merchant account to accept credit card payments. You can create an account with a payment service provider, like PayPal, Stripe, Square, Shopify, or Clover, to get all the services you need to process credit card payments in one place.
How to 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 anywhere by downloading a point of sale app like Square. The processor allows you to accept cards by entering the number manually or by using a small attachment in your headphone jack to swipe the cards.
Can I accept credit card payments without a business?
Anyone can create an account with a payment service provider like PayPal or Stripe; you don’t need to be a legal business entity. These accounts allow you to accept credit card payments from anyone, including friends, family, customers, and customers. You can use them to accept credit card payments online or through their mobile apps by sending a link to request payment or giving your email address to the payer. When you receive payment for goods or services (as opposed to money from family or friends), you have to pay a processing fee, usually a small percentage of the transaction.
What’s the cheapest way to receive credit card payments?
The cheapest way to accept credit card payments for your business depends on the type of business you run and how your customers pay. Payment processors use various pricing structures for their services. For most small businesses, a payment service provider is your easiest and cheapest option. You’ll pay a nominal fee per transaction, but you won’t have to worry about subscription fees or working with multiple service providers. Higher volume businesses will likely benefit from a more complex payment processing system.