The popularization of online payment methods heavily affected consumer shopping trends. Decades ago, people only paid with cash. However, most millennials and gen Z consumers prefer alternative card, mobile, and digital payment methods over cash nowadays. It’s no exaggeration to say that credit and debit card payments have surpassed cash transactions.
If your business still doesn’t accept credit cards, don’t worry. The increased demand for payment processing paved the way for some of the best merchant services for small business owners like PayPal, Stax, and Square. They have less stringent applicants. SMBs can qualify for an account even if they only process a few orders daily or have no tenure.
Modern consumers prefer digital payments for their convenience and security. While a standard-sized wallet can only carry 10 to 15 bills at most, credit/debit cards and mobile wallets can store up to several grand. These platforms also offer better security. You can turn to your issuing bank for assistance if someone hijacks your card, but you cannot track stolen bills.
The number of cardholders has steadily increased over the past decade. Statistics even show that only 12% of all POS transactions in 2020 consisted of cash payments. Most prefer credit/debit cards and mobile wallets now. Your business might get left behind if you don’t upgrade to a new payment processing system yet.
Despite the popularity of card payments, nearly 15 million entrepreneurs in the U.S. still operate cash-only businesses. Commercial processors often have stringent requirements. Fortunately, SMBs with no credit rating or minimal tenure can still qualify for merchant services through the following third-party processors:
PayPal tops among the most popular payment processors in the market. Although high-risk businesses might not qualify for an account, most merchants should have no trouble processing payments through PayPal.
Low-volume merchants might want to explore other options because PayPal has relatively high fees. They charge 2.29% + $0.09 per in-store swiped or tapped transaction, 2.99% + $0.49 per online card payment, and a whopping 3.49% + $0.09 per keyed-in in-store transaction.
Although PayPal charges fees above the industry standard, it also offers a broad range of business tools. PayPal merchants have access to online invoicing, payment gateways, payout platforms, POS system integration, and in-app shopper insights.
PayPal best suits high-volume merchants with adequate profit margins and orders to offset the high fees. Low-volume startups should consider cheaper options.
Fattmerchant rebranded as Stax early in 2021. Along with the name change, Stax also updated its subscription packages and pricing schemes.
Stax offers two plans: the standard and enterprise plan. Businesses that generate less than $1 million per annum can opt for the standard plan, while merchants with a higher revenue must switch to the enterprise package. They cost $99 and $199 per month, respectively.
As for the processing fees, Stax charges interchange rates + $0.15 for keyed-in payments and interchange rates + $0.08 for swiped in-store transactions. Consult their agent to determine what interchange rates apply to your business.
Stax offers the same features it did as Fattmerchant. Merchants can utilize the countertop terminals, POS system integration, virtual terminals, mobile processing, and virtual shopping carts.
Stax suits high-volume merchants that process several mid-range items daily. Your profit margins should cover the added interchange-plus rates of $0.08 to $0.15.
Merchants know Payment Depot for pioneering the subscription pricing model. It was among the first processors to offer multiple pricing plans with varying processing fees.
Payment Depot typically offers three membership plans: the starter, mid-level, and enterprise membership.
The starter membership has a monthly fee of $79, charges interchange rates + $0.15 per transaction, and suits merchants that process less than $50,000 per month.
Mid-level memberships have a $99 monthly fee, charge interchange rates + $0.10 per transaction, and suit merchants that process less than $150,000 per month.
Lastly, enterprise membership plans have a $199 monthly fee, charge interchange raters + $0.07 per transaction, and suit merchants that process less than $300,000 per month.
Note: The interchange rates vary, but most merchants say that they pay around 2.11%.
Payment Depot provides varying features based on your plan. Starter members have access to basic processing services, mid-level merchants get data breach protection, while enterprise clients get data breach protection and a dedicated account manager.
With Payment Depot’s multiple membership plans, merchants can select whatever package suits their processing needs.
Square stands among the best merchant services for small business owners. Their extensive business tools, reliable processing services, and affordable fees make it easy for startups to turn a profit.
Square offers predictable flat-rate interchange-plus fees. Merchants pay 2.6% + $0.10 for in-store swiped and tapped card transactions and 3.5% + $0.15 for keyed-in transactions.
Digital entrepreneurs can utilize Square’s developer tools and eCommerce processing platform. You can even use these systems to build a free online store.
Square best suits low-volume startups that sell low-cost items. This cost-efficient pricing model allows merchants to maximize their profit margins without overcharging their clients.
Helcim is a popular payment processor for eCommerce businesses. Its streamlined, comprehensive platform enables merchants to process overseas transactions in foreign currencies.
Helcim offers a tiered interchange-plus pricing plan based on your monthly processing volume. Startups that process less than $25,000 pay interchange rates + 0.30% + $0.08, while companies processing more than $5,000,000 monthly only have to pay interchange rates + 0.10% + $0.05.
Apart from international payments processing, Helcim also offers an extensive POS system. Merchants can access product service catalogs, online invoicing, inventory tracking, and automatic tax computations.
Helcim best suits U.S. and Canadian businesses that want to accommodate overseas customers. They also have customized interchange-plus pricing rates, so you can sign up for a plan that matches your processing needs and current order volume. However, note that high-volume merchants get the best rates.
Applying for a merchant service account seems intimidating to first-timers. However, the process is more straightforward than most assume. Follow this step-by-step guide to get a merchant account in under a week or two:
Don’t worry if you still find payment processing confusing — we have you covered! Check out some of the questions business owners commonly ask when applying for a merchant account.
GoPayment and PayAnywhere have the lowest processing fees at 2.4% + $0.25 and 2.69%, respectively. However, note that PayAnywhere’s flat-rate scheme suits high-volume, low-ticket orders best.
SMBs should look for merchant service providers that charge around a base interchange rate of 1.7% to 2.4%. Higher rates might hurt your profit margins.
Merchants need to present documents proving they run a legal entity. Payment processors accommodate common legal structures, such as a sole proprietorship, general partnership, limited liability company, or corporation.
Most payment processors prioritize merchants with low chargeback rates, high credit scores, and a steady cash flow. If you don’t meet these requirements, opt for third-party options. They accept high-risk merchants, but you’ll likely have to pay higher processing fees.
Most merchants receive confirmation from their respective processors after two to three business days, although applications with incomplete documents might take up to two calendar days.
These are just some of the best merchant services for small business owners. Feel free to explore other options. Dozens of commercial and third-party institutions offer payment processing services, so you don’t need to limit yourself to just one or two choices. See which provider best suits your processing needs.
Are you having doubts about applying for your first payment processing system? Processing Card can help shed some light on the topic! Check out our brief guide on deciding whether your business is ready to start accepting credit card payments.
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