When you see the word “free” used to describe merchant account services, it usually refers to one of two things. The merchant account provider may be waiving all set up fees, credit card equipment fees, and other miscellaneous fees, to provide you with service in which they only charge the discount fee, or a percentage of each sale as it occurs. Or, free merchant account services can describe 3rd party processing, where another company pays the associated expenses and processes your credit cards for you.
Nothing about free merchant services is actually free, because either the merchant account provider or 3rd party processor will always charge a percentage of each sale. However, traditional merchant accounts often charge fees for applications, equipment, start up expenses, monthly statements, batch summaries, and more. Using a free merchant account can save a company from paying a lot of up front expenses.
Merchant account providers who waive the fees associated with opening and maintaining an account do so to be competitive in their industry. They wish to appeal to new vendors and grow their profit from numerous discount rates being paid. So, they cover all the other expenses and fees under the assumption that they will earn the money back and begin to gain a profit after a short time. As with most merchant account services, a contract generally applies that specifies the length of service.
With 3rd party free merchant accounts, another company accepts credit cards on behalf of your business, but charges you a few extra percentage points on each transaction. Again, this saves money up front that would ordinarily go to pay for expensive processing software, equipment, customer service fees, payment gateway fees, or minimum transaction fees. Plus, 3rd party services rarely do credit checks and can start processing cards immediately. If your business performs a limited number of card transactions, this may be the best route to take. However, for high volume sales, paying those few extra points can end up costing a lot more in the long run. Some people choose to use a 3rd party free merchant account a a stepping stone until their business takes off.
Best Merchant Accounts
