The world of business finance can be intimidating, particularly if you’re new to it all. One of the most common points of confusion surrounds what is called a ‘merchant account’. This account is distinct from your other business accounts and works very differently, though it has historically played every bit as critical a role in getting money from a customer to you.
To clear some of this confusion, let’s take a moment to look at merchant accounts: what they are, how they work and whether you actually need one at all. (Spoiler alert: you don’t.)
Read on to find out exactly what these accounts are, and how to accept credit cards without a merchant account.
What is a merchant account and how do I create one?
A merchant account essentially acts as a middleman between a buyer’s credit card and a seller’s bank account. When a transaction is shown as ‘approved’ on a card machine, money is moved not to the business’s account, but to a merchant account, where it sits for a settlement period of 1-7 days.
This period gives the bank time to do the checks and balances required by banking regulations, and offers a bit of insurance against disputes, accidents and fraud, because funds are harder to recoup once they’re sent to the seller, who can then spend them or move them.
Their unique role means that merchant accounts don’t work the same as normal business accounts. While the business technically owns the account, it doesn’t have direct access to it, nor can it draw money from it. It’s just there to temporarily hold money.
Unfortunately the application and approval process for merchant accounts is rather clunky. Providers ask for a long list of information from the business, including:
Type of business: The provider wants to know whether you’re at higher risk of returns, disputes or credit card fraud.
Business history: The provider will ask how long you’ve been in business, whether the business has previously held merchant accounts, and whether the business has had financial trouble in the past.
Personal credit history: Providers often specifically look at you, the business owner, too – have you had any personal financial issues in the past?
Disadvantages of merchant accounts
Sure, they play an important role, but merchant accounts also have their downsides, including:
A complex application process: As mentioned above, the process of applying for a merchant account can be a clunky and complex one, filled with endless forms. For those new to the world of commercial finance it can prove a real challenge to navigate.
The likelihood of disapproval: A lot of businesses fail to get approval for merchant accounts. There are two main reasons for this; a) they have made a mistake during the application process that leads to an automatic denial, or b) the business or owner has had a financial issue in the past that results in a denial.
A number of fees: The fees associated with merchant accounts are many and varied, including setup and application fees, monthly account fees, per-transaction fees, international transaction fees and terminal rental fees.
How to accept credit card payments without a merchant account
Given the issues described above, at this point you might be wondering how to process credit cards without a merchant account… and there is indeed a way. Granting you the ability to take card payments quickly and easily, Square Payments lets you remove the need for merchant accounts.
How to accept in-store payments without a merchant account
The latest and greatest point of sale systems, including Square POS, allow businesses to take credit card payments without having to have a merchant account, while also granting you the ability to manage your finances, team and even customer loyalty programs!
How to accept online payments without a merchant account
What if you don’t have a POS, but instead sell through an online store? Processing online payments is a cinch with Square as our payment processing technology doesn’t require a merchant account, and automatically integrates with your Square Online Store.
How to accept payments for a mobile business without a merchant account
If you own a mobile business servicing customers around your area, or perhaps a small retail business that sees you attend market days, you might be in the market for a mobile payment solution. If you want one that does away with the need for a merchant account, look no further than the combination of the Square App and Square Reader!
How to accept payments over the phone without a merchant account
Do you take credit card payments over the phone? No matter whether you work (and take payments) remotely or invoice your clients before offering them post-pay terms, the ability to take payments over the phone can be incredibly valuable. Square Virtual Terminal allows you to do exactly that, accepting phone and MOTO (Mail Order/Telephone Order) payments without the need for a merchant account.
Benefits of using Square
Why choose Square as your payment solution provider? The reasons extend far beyond the removal of merchant accounts:
Accept all major payment types: With Square you can accept payments in-store, online, on the road, remotely, and over the phone. You can take all major credit and debit cards, Apple Pay, Google Pay and Samsung Pay, and even offer Buy Now Pay Later services like Afterpay.
Quick and easy setup: By choosing Square you won’t need to visit a bank, perform a background check or apply for a merchant account. You can get set up in mere minutes and take payments right away.
Get paid fast: With merchant accounts you face an up to seven-day wait for money to get to you. With Square you can receive money into your account as fast as the next business day.
Enjoy ultimate security: At Square we have built our organisation around a central pillar of security. We invest heavily in ensuring your money is protected, from the moment a customer clicks ‘purchase’ through to when you receive the money in your account. Our technology is engineered for security from the ground up.
All in all, Square both simplifies and greatly expands the ability of your business to serve the payment needs of your customers. No paperwork, no credit checks, no merchant accounts, no worries. If you’re ready for a quick and easy way to start accepting and processing payments, Square is ready to deliver it.