MERCHANT SERVICES 101:

The three paths to accepting card payments.

How you accept credit and debit cards is a big decision that can cost you time and money. You can choose which breakdown you’d like depending on your appetite for information about merchant services and the amount of time you have.

The Video

Here’s a short video highlighting the ways you can begin accepting credit cards at your business.

Square vs. other merchant service providers

A full walkthrough of getting started

What are merchant services?

Merchant services is a broad term that describes the hardware, software, services, and financial relationships needed for businesses to accept and process credit or debit card payments from their customers. Many types of entities are authorized to be merchant services providers, and they are sometimes known as merchant account providers, credit card processors, acquirers, acquiring banks, or processors. Businesses can accept credit or debit card transactions online, through a payment card reader, or with a point-of-sale system.

What is a merchant account?

A merchant account—aka merchant services account—establishes a business relationship with a merchant services provider, like a bank, and enables a business to accept debit and credit cards, Apple Pay and other contactless payments, eCommerce transactions, and more.

OPTION 1

The Bank

Your bank may feel like the logical place to go for merchant services and credit card processing. After all, you already have a relationship with them and trust them to help with your business needs. But when it comes to accepting payments at your business, your bank relationship may not mean as much as you think it does.

Here’s how it works. At your bank, you need to apply for a merchant account to accept credit cards.

Before applying, you need a business license. Applications for merchant credit card services can include credit histories, employment history, bank statements, and more. Plus, it may take several days or longer for your merchant account to be approved, depending on the type of business you have and your experience.

Once approved, your bank—depending on your business size or the bank’s size—may be able to help you directly with your merchant services needs, such as payment processing, card reader hardware, and other software like POS systems. More likely, the bank will refer you to an acquiring partner. That means that you’re no longer working directly with the bank that you thought you had a relationship with. Instead, you’re working with a third-party company that may be vetted by your bank but which you may not know that much about.

Whether you end up working with the bank or, more likely, a third-party acquiring partner, you’re going to end up with a “bundled” solution. This means that your payment processing, hardware, and software may be sold as one big package but are actually all from different companies. Sure, it may work in theory, but products made by different companies don’t always work together seamlessly. It’s highly likely that you’ll need additional support to get all the systems working together. You have to pay for that out of pocket. Plus, keeping all those systems working together over the long haul can mean lots of expensive maintenance.

Another thing to watch for is whether your bank- or acquiring partner–sourced credit card processor allows you to accept all major credit card brands. If not, you may need to apply to those networks separately.

Finally, you need to get all the different pieces certified as PCI compliant. If you’re ever found not to be PCI compliant, you could be subject to heavy fees and fines.

Now you can finally accept cards at your business, but what are the pros and cons of accepting payments through your bank?


OPTION 2

The ISO

Sometimes, you may find yourself on the radar of an independent sales organization, also known as an ISO. Most of the time, an ISO approaches you proactively. Other times, you may reach out directly to the ISO, finding one through either advertisements or by searching online. If you have a smaller bank that doesn’t have acquiring partners, the bank may even refer you to an ISO.

However you ended up in contact with an ISO, it may seem like a great option on the surface.

To start, you still need a merchant account. You may need to fill out a long application that includes manual credit checks, bank statements, and employment histories. A representative from the ISO will likely help you do this.

ISOs often advertise very low rates or inexpensive options, and you think that you’re getting a great deal on your merchant services or credit card processing.

But there’s a catch. While the credit card processing rates may seem low, you often find yourself hit with a bevy of additional fees. If you work with an ISO, you need to be very careful to have a full understanding of the terms of your contract and the fees that you may need to pay.

Like the bank, the ISO bundles hardware, software, and credit card processing together from different companies. As with all bundled solutions, the payment processing, hardware, and software may work together in theory, but you’re likely to need additional support—which you have to pay for—to get all the systems working together.

Finally, you need to ensure that your end-to-end payments system is PCI compliant. Again, not being PCI compliant means you could be subject to heavy fees and fines.


OPTION 3

Square

You fill out an application in minutes.

The fully integrated system of hardware, software, and credit card processing works together seamlessly. Our software is PCI compliant at no extra cost to you and our hardware/readers have end-to-end encryption out of the box with no configuration required. And you don’t even need your own merchant account with Square.

You’re all set.

Want to learn more about accepting payments with Square?

Don’t take our word for it, ask them yourself.

Ask your ISO or separate suppliers the following to find out what you’re signing up for.
  1. What monthly fees are charged for the average merchant?
  2. Do you charge point-of-sale software fees, authorization fees, gateway fees, statement fees, chargeback fees, return fees, PCI-compliance fees, batch fees, early termination fees, international card fees, business card fees, or non-qualified fees? And on average, how much do those fees add up to in a month?
  3. How long do you hold transfers?
  4. How much does it cost to buy point-of-sale hardware?
  5. What is the average wait time for your customer service?
  6. What is the buyout cost of your hardware and card processing contracts?