The Best Merchant Services for Small Businesses

The Best Merchant Services for Small Businesses

The era of cashless transactions is now firmly upon us with only 14% of customers still paying for goods and services with cash. It’s, therefore, essential for both brick-and-mortar and eCommerce retailers, to be able to accept all kinds of non-cash payment options—whether online, in person, or over the phone.

Best Merchant Services For Small Business_Cash Payments_Infographic

This is where merchant service providers (MSPs) come in. They provide the means for you to accept such cashless payments. Without them, you’ll be stuck with cash payments only.

In this article, we’ll discuss the role of merchant service providers, how to pick the right one for your business and share our top picks for you to choose from.

What Is a Merchant Service Provider?

Put simply, a merchant account provider facilities the payment of funds from your customer’s credit card company to your business bank account. You can accept their credit cards, debit cards, and mobile wallets using point-of-sale systems, mobile readers, virtual terminals, or online payment gateways.

The full scope of payment solutions offered by these credit card processing companies generally includes the following:

  • Card payments processing: You will be able to accept payments from customers by dipping, tapping, or swiping their cards into processing hardware like payment terminals, POS systems, and card readers that your merchant services provider offers. 
  • Mobile payments: Your credit card processor may provide apps for processing mobile payments carried out using mobile devices like phones or tablets.
  • Payment gateways: eCommerce businesses can get access to a payment gateway that integrates with their eCommerce platform to facilitate online payments.
  • Business services: In addition to payment processing services, the hardware and software provided by your merchant service provider may also come with features like loyalty programs, invoicing, inventory tracking, CRM, and more.
  • Merchant accounts: This is what underpins all the services and tools offered by your service provider. The account can be dedicated or aggregated. You’ll retain the exclusive use of a dedicated account, while an aggregate account is shared with other merchants. 

How to Choose a Merchant Services Provider for Your Business

There are three major factors to consider when choosing a merchant services provider for your business. Let’s take a closer look at these.

1. Pricing structure

Costs can rack up pretty quickly if you opt for the wrong provider. As such, there are three major types of processing fees you need to be aware of before making your decision. These are:

  • Transaction fees: These rates are set by your provider as the cost of processing your card payments. The amount charged per transaction will include the interchange rate set by the card issuing company and a percentage fee based on the amount processed (also known as the processor’s markup). The percentage fee/markup is set by your provider and may be negotiable.
  • Account fees: These include any administrative costs that may be charged for the use of your merchant account. For example, monthly minimum fees, statement fees, annual fees, etc.
  • Incidental fees: These include any one-off fees that you may have to pay, for example, chargeback fee, PCI compliance fee, batch fee, network fee, AVS fee, etc.

You will also have to pay for the devices/equipment your MSP provides for payment acceptance. The payment model will depend on whether you lease the equipment or buy them outright. 

Your processing fee is often the most consequential type of payment you will make to your provider. Ensure you only sign up with a provider whose pricing model is most suitable given your business needs. The three types of pricing models are:

Best Merchant Services For Small Business_Pricing Models_Infographic

Tiered pricing

In this model, your provider will offer three types of rates: qualified, mid-qualified, and non-qualified rates. Qualified rates will apply to card-present transactions, mid-qualified rates will apply to cashback credit cards and keyed-in payments, while non-qualified rates will apply to card-not-present transactions, corporate cards, and high-risk cards.

Your provider will decide when to apply each type of rate to your transactions, and the percentage fee/markup will increase as you go from qualified to non-qualified transactions. This is the core issue with tiered pricing—the lack of transparency. It is impossible to determine what your provider will charge for each transaction and this makes it difficult to estimate/track your processing fees.

Tiered pricing is not always beneficial for business owners and it is only advantageous when you are certain the majority of payments will be card-present transactions with regular debit cards.

Flat-rate pricing

Here your provider charges a fixed percentage as processing fees for each transaction. This means the percentage will stay the same for every type of transaction. This payment model is offered by aggregate merchant service providers like PayPal and Stripe which don’t charge account fees.

It is a cost-effective model for small businesses that process less than $5000 each month since all they have to pay is the processing fee for each transaction without any additional monthly or annual account fee charged in other pricing models.

However, it is not often suitable for businesses that process larger volumes of transactions. Such businesses will lose the cost savings they may get by negotiating lower rates in other types of pricing models.

Interchange-plus pricing

In this pricing model, the provider will set a negotiable markup that will be added to the interchange rate. The main advantages of this model are transparency and flexibility. You know how much you are being charged per transaction, and you may also be able to negotiate a lower rate. 

This makes the model perfect for businesses that process significant volumes of transactions each month. You will be able to track your payment processing costs and negotiate lower rates when you start processing higher volumes.

2. Features

These refer to the services and tools that provide the functionality needed to accept card payments. These include:


By hardware, we mean POS systems, card readers, and other payment terminals. They should be able to process card information from major card brands including Mastercard, Visa, American Express, and Discover. They must also support EMV chip cards and contactless payments like Apple Pay or Google Pay.


The payment processing hardware and software offered by your provider must be able to integrate with the existing software applications (QuickBooks, CRM, etc.) you are using to run your business.

Payment settlement

The speed with which your provider transfers funds after a sale and furnishes your account will have a major impact on your cash flow. You’ll want to work with a service provider with fast ACH payment processing that offers same-day or next-day funding to ensure you always have money available to spend on your business.

Customer support

Things can always go wrong, and unforeseen events can occur. You’ll want your provider to offer 24/7 customer service to ensure your inquiries are answered anytime you call.


Your provider must also provide comprehensive protection from card payment fraud. This means the company must ensure PCI compliance. PCI-complaint credit card processors have been affirmed to follow technical and operational standards to secure card transactions.

3. Contracts

Your contract will determine the duration of your relationship with your service provider and any applicable consequences for terminating the agreement prematurely.

You’ll want to avoid locking yourself into a long-term contract. And if you must, be wary of providers that impose early termination fees or cancellation fees. Such fees can make it very expensive for you to get out of an unfavorable contract.

The best types of contracts will give you month-to-month terms and you will be able to cancel the agreement at any time without any financial penalty. 

9 Best Merchant Services for Small Business Owners

All the providers listed below offer the necessary hardware and software solutions needed by most businesses. However, the differences in their customer focus, proprietary software tools, hardware features, payment methods, and services make each of them suitable for a specific type of business. Check out our evaluations below to see the provider that best meets your specific business needs.

1. Payment Depot: Best overall with low subscription-based pricing

Payment Depot offers affordable payment processing fees coupled with the full range of tools and software solutions you need to run your business successfully. Our membership-based plans are based on a wholesale interchange-plus pricing model without any markups. You’ll pay a fixed monthly membership fee with no contracts and no hidden fees.

Best Merchant Services For Small Business_The Payment Depot Advantage_Infographic

There is a small per-transaction fee that depends on your processing volume and it ranges from 15 cents for lower volumes to 7 cents for higher volumes. The different plans are:

  • Starter plan ($59 per month): For businesses that process transactions up to $125,000 each year
  • Starter Plus plan ($79 per month): For businesses that process transactions up to $250,000 each year
  • Growth Plan ($99 per month): For businesses that process transactions up to $500,000 each year

The plan you opt for will depend on the scope of services you need and the volume of your transactions. You’ll soon see that you’re able to recover the cost of your membership plan from all the cost savings you get from our low processing fees, zero hidden fees, and the absence of markups.

2. Stax: Best for high-volume businesses

Stax also offers membership-based pricing with no markups or hidden fees. The company also offers a range of proprietary software solutions and features like text2pay, card-on-file payments, white-labeled payment processing, robust reporting, and more. 

This extensive range of solutions and its transparent pricing model makes Stax an excellent option for businesses that process high volumes of credit card transactions and require business productivity tools. 

Stax charges a small per-transaction fee of 8 cents for card-present transactions and 15 cents for online and contactless payments. Its monthly membership plans cost $99 for the basic plan, $159 for the popular Pro plan, and $199 for the Ultimate plan.

Given the subscription costs, Stax may be well suited for businesses that process at least $7000 each month. As with Payment Depot, the more transactions you process, the more money you’ll save for your business.

3. Helcim: Best for established businesses

Helcim also offers interchange-plus pricing. However, it doesn’t charge a monthly fee. The absence of monthly fees and its transparent pricing model make the provider an excellent option for businesses that need predictable processing rates.

However, one major drawback of this provider is the limitations of its software and the few hardware solutions on offer. You may pay zero monthly fees, but you’ll also miss out on some important features and robust hardware options.  

Its processing fees per transaction for in-person payments start from interchange + 0.30% + 8 cents for businesses that process between $0 to $25,000 per month. This goes down to interchange + 0.10% + 5 cents for businesses that process more than $5,000,001 per month.

For online and contactless payments, it starts from interchange + 0.50% + 25 cents for $0 to $25,000 monthly volume, and goes down to interchange + 0.20% + 10 cents.

4. National Processing: Best for low-cost eCheck/ACH processing

This company also uses an interchange-plus pricing model, but what sets it apart is its relatively low processing rates. National processing also offers a rate-lock guarantee for businesses that process $10,000 or more each month.

The issue with this provider is that it charges a hefty early termination fee along with other additional fees that are not charged by the other providers listed above.

The processing fee imposed by the company will depend on the type of business. Its pricing plans are:

  • Restaurant Businesses ($9.95/month): Processing fees = Interchange rate + 0.14% + $0.07 per transaction
  • Retail ($9.95/month): Processing fees = Interchange rate + 0.18% + $0.10
  • eCommerce ($9.95/month): Processing fees = Interchange rate + 0.29% + $0.15
  • Non-profits ($9.95/month): Processing fees = Interchange rate + 0.12% + $0.06

5. Square: Best for growing businesses

Square is ideal for small, growing businesses because the application process is straightforward and its POS software platform is available for free. You can get started with little cost by downloading the software to your tablet or other existing payment processing hardware.

All you have to pay are processing fees charged at a flat rate and there are no additional fees or monthly account payments. 

Here is how Square’s processing fees are structured:

  • Card-present payments: Interchange rate + 2.6% + 10 cents
  • Keyed-in and card-on-file transactions: Interchange rate + 3.5% + 15 cents
  • Online invoice and eCommerce payments: Interchange rate + 2.9% + 30 cents

The issue with Square is that it does not vet businesses upfront, so approvals are almost instantaneous. However, in due course, if it comes across any red flag during its risk analysis, your account may be suspended or even terminated with little to no warning.

6. Stripe: Best for eCommerce businesses

Stripe is an ideal provider for eCommerce businesses because its software integrates seamlessly with most eCommerce platforms. It supports a wide range of payment types and comes with customizable, pre-built checkout forms and shopping carts.

The downside is that you will need technical expertise or a paid software developer to fully integrate the Stripe API features with your online store.

Stripe uses a flat-rate pricing model and charges interchange + 2.7% + 5 cents for in-store payments, while contactless payments and online transactions cost interchange + 2.9% + 30 cents.

Stripe has the same issue as Square in that its risk analysis isn’t done upfront, so you may be in for unpleasant surprises in the form of account holds or freezes at any time.

7. PayPal: Best for nonprofits and occasional sales

PayPal’s ease of use and flat-rate pricing model makes it suitable for small businesses that make occasional sales each month. It also offers favorable rates for nonprofit institutions.

The drawback is the lack of account protection. PayPal too does not conduct its risk analysis upfront, so your PayPal account can be suspended or frozen without warning for any reason deemed sufficient by the company. This is not ideal for most businesses that need the assurance that their funds will always be available whenever they need them.

PayPal’s processing fees depend on the type of transaction. The percentage fee ranges from 1.9% to 3.49%, while the markup ranges from 5 cents to 49 cents. 

8. Clover: Best credit card processing for new businesses

Clover’s flat-rate pricing model along with its Rapid Deposit Services that enable near-instant payment settlements makes the provider an excellent choice for new businesses and startups. There are no monthly membership fees and you will always get your funds almost immediately.

However, there are daily limits to instant transfers and the company charges a number of additional fees. 

Clover’s processing fees include the interchange rate + 2.3% + 10 cents per transaction, and you will have to pay a monthly fee for each Clover device. 

9. Payment Cloud: Best for high-risk merchants

This company is ideal for high-risk businesses (businesses that inherently carry higher risk). This includes businesses that sell firearms, adult content, gambling services, drugs, e-cigarettes, and telemarketing services.

The provider is able to accommodate high-risk merchants because it has built a formidable network of willing back-end processors and acquiring banks.

Pricing information is not available on the company’s website, but your rates will likely be calculated based on the level of risk your business carries. The company provides 24/7 customer support to help guide you through the process.

The Bottom Line

Payment Depot Highest Rated Processor_Banner

Choosing the right payment processor will save you money and simplify payment processing for your business. The wrong choice, on the other hand, can be very costly to forgo and may cause you to lose customers. 

Payment Depot stands out for its well-rounded software and hardware solutions coupled with a very affordable membership-based pricing model. Talk to our award-winning customer service team today to learn how we can help you save hundreds of dollars in credit card processing every month.


What is a merchant account and how does it work?

It is a business bank account that lets you accept card payments. It can be dedicated (exclusive) or aggregate (shared). The main advantage of an exclusive account is that it’s easier to rectify errors and fix fraudulent transactions since all funds in the account are yours.

Are credit card processors different from merchant account service providers?

A credit card processor works behind the scene to facilitate credit card payments, while a merchant service company provides the hardware and software for receiving the card payment and the merchant account into which the funds will be paid.

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