Can You Accept Credit Cards Online Without a Merchant Account?

Can You Accept Credit Cards Online Without a Merchant Account?

Credit cards really do make the world go round. Whether you’re shopping online or in-store, dining in a restaurant, or booking a flight—swiping your credit card at checkout gives you the product or service you desire—very quickly. 

Likewise, if you’re selling goods in person, through an online store, or building a web-based service business, you want to make it easy for your customers to purchase what you offer. From that perspective, your customers’ credit card orders really are the lifeblood of your business.

To process all major credit cards (Visa, Mastercard, Discover, American Express), digital wallets (Venmo or Apple Pay), and other payment methods (ACH, payment links, mobile payments, contactless payments, or recurring payments), and get those funds flowing into your company, you must set up a merchant account to receive them

You must also work with a payment processing provider, a business that interfaces with the customer’s bank and (ideally) gets a green light for the payment. 

When the payment goes through, the payment processor deducts the transaction fees and routes the remaining funds to your merchant account. In most cases, this entire process is completed within seconds, and both parties get the desired result.

But to get your own merchant account, you need to go through an application and underwriting process, which can take days, even weeks to complete. Also, depending on the nature of your business and finances, there is a chance that your application will be declined. 

In the event that you’re unable to get a merchant account, will you still be able to process credit card payments? The short answer is yes. Read on below to learn more about how to do it.

How to Accept Credit Cards Online Without a Merchant Account

You can still accept credit and debit cards online without a merchant account. To do that, you must engage the services of third-party credit card processing companies. Essentially, these companies process multiple customers’ credit card payments and funnel the proceeds into one single merchant account. Payment service providers authorize, process, and settle payments on behalf of their clients.

After deducting your transaction processing fees, they route your business’ net funds to your business bank account. This transfer generally occurs within one to two days after each credit card transaction. Third-party payment providers include PayPal, Square, and Stripe, among others.

Pros of Not Using a Merchant Account

There may be several advantages to not using a merchant account to process payments. Let’s take a look at some of them below.

Easier sign-up process

Small business owners looking for a streamlined account sign-up process, will likely find it with a third-party payment processing provider. You won’t need any extensive documentation, and the lead time will be mercifully short. Best of all, after completing your account set-up work, you can quickly begin accepting payments online without a merchant account.

Simplified, understandable fee structure

By using a third-party payment processing provider, you’ll pay a standard transaction fee that often varies with the transaction type. Just note that the fee will likely be a bit higher than you’d encounter with a bank-based merchant account.  

The good news? You likely won’t have to deal with a set-up fee, monthly service fee, Payment Card Industry (PCI) fee, security fee, refund fee, chargeback fee, or early contract termination fee. 

No long-term contracts

Working with a payment processing provider means you’ll deal with some form of contractual structure. However, you won’t be stuck with a long-term contract that locks you in even if your business needs change. If you decide to cancel the contract, that’s generally a simple online process. 

In contrast, bank-based merchant account terms typically require you to sign a long-term contract (generally for three years). The contract likely includes an automatic renewal provision that extends the contract for another year. And, if you close the account early, you’ll pay a hefty termination fee. 


A merchant account basically acts as a hold for funds. On the other hand, a payment processor can not only take care of your credit card transactions but also give insightful data about them. Many payment processors out there provide powerful analytics functionalities with which you can learn more about your company’s finances and identify trends and patterns. 

Understanding customer shopping behavior and uncovering trends will help your business stock items better and give customers what they are looking for. You’ll also be able to spot issues and delays in the payment process and smoothen them out quickly. 

Apart from analyzing historical data, you can even avail real-time monitoring features to track transactions as they happen. This is a great way of catching anomalies and preventing fraudulent transactions.

The Cons of Not Using a Merchant Account

All said and done, not using a merchant account does come with a few shortfalls. Here are some of the most notable ones.

Higher fees

A prominent drawback of using a payment processor compared to a traditional merchant account is potentially higher processing fees. Payment processors often charge additional fees, such as transaction fees or monthly service charges, which may accumulate over time and be more expensive than the flat rates offered by some merchant account providers. 

Also, there could be a variety of hidden fees that might differ from one payment processor to another. This is why you need to read your contract carefully before choosing a payment solutions provider. 

Less rate flexibility

A payment processing provider’s one-fee rate plan can be a blessing and a curse. If your business doesn’t process many transactions, you won’t be penalized for generating a lower business volume. 

However, the opposite is also true. A business with more customer transactions won’t receive any savings from its increased business volume. In that case, a dedicated merchant account with rate plans catering to higher-volume businesses would be a better choice.

Service interruptions or cancellations

There is an inherent risk with using any third-party service provider, not just for credit card processing. Payment processing providers often accept higher-risk business clients that wouldn’t qualify for a bank-based merchant account. That translates into increased risk for the payment processor. If your business falls into that category, you’re more likely to experience an account hold for certain transactions. 

When the payment processor decides they no longer want to assume that higher risk, they can simply cancel your account. Now, you’re scrambling to find another payment processing service before your customers take their business to a competitor.

So while working with a payment processor may be convenient, this also means that issues on their end can lead to a complete shutdown of your credit card services. Moreover, you’d be completely helpless in this situation as you’d have no control over fixing the issues. 

Having to use a payment processor also means that you don’t have complete control over how your business processes credit card payments. Payment providers can have their own restrictions and rules on the type of transactions that can be accepted and the industries they can service. You will have to research the policies of payment processors before choosing the right one so their policies don’t interfere with the goals that you have for your business.

Questionable customer service

If you want 24/7 customer service that solves your immediate problem, a payment processing provider might not be the best choice. Payment processors work with many clients so they most probably won’t be able to provide dedicated staff to handle just your account.  

Yes, the payment processor might offer online chat and/or telephone service during certain hours. However, the customer service representatives may not be available when your system goes haywire at 2 a.m. 

Even if you reach someone, you might not get the resolution you need, especially regarding an account hold or cancellation. Here’s where a bank-based merchant account provider might prove helpful. These larger, better-staffed businesses are more likely to employ knowledgeable associates who can actually help you.

How to Make the Best Decision for Your Business 

So, should you sign up with a third-party payment processing provider, giving you the ability to quickly accept credit cards online without a merchant account? Or, should you apply for a merchant account?

Here are a few points to consider when making this decision.

  • Transaction volume: Evaluate your typical transaction volume to determine if a merchant account or payment processor is more cost-effective.
  • Fees: Compare processing fees, including transaction fees, monthly fees, and any additional charges, to assess overall cost.
  • Contract terms: Review contract terms, including cancellation fees and contract duration, to ensure they align with your business needs.
  • Security: Assess the security measures offered by both options to protect sensitive credit card information or other payment data and minimize fraud risks.
  • Integration: Consider compatibility with your existing systems, website, or point-of-sale (POS system) for seamless integration.
  • Value-added services: Look for additional features or services offered, such as analytics, reporting tools, or fraud prevention, to enhance your payment processing experience.
  • Growth potential: Consider scalability and flexibility to accommodate future business growth and changing needs.

Consider what’s most important at this stage of your business. 

Let’s say you’re about to launch your company, or you’ve only been in operation for a short time. You want to get up and running with no sign-up delays, no excessive fees and restrictions, and no long-term contracts. In that case, a third-party payment processing provider might be the answer. A small business that is just starting out would do well by partnering with a payment processing company.

If you’re a techie who can generally “make things work,” the third-party processor’s less-than-stellar customer service might not be a big concern. If you’re happy with those conditions, signing up enables you to quickly accept credit cards online without a merchant account.

However, those positive points might not compensate for the payment processing provider’s downsides. First, you’ll pay higher transaction fees, and your established business won’t receive the lower rates that a bank-based merchant account might offer. 

If you operate a higher-risk business, you could be impacted by an account freeze or even a cancellation, potentially putting a severe crimp in your business operations. And, after all that, you might not receive adequate customer service when you need it most.

Like most business decisions, putting the pros and cons down on paper (or the computer screen) will help to view the issue objectively. Then, you’ll be prepared to decide how your business will accept credit cards online without a merchant account.

Still Need Help Deciding?

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Payment Depot can point you in the right direction. Get in touch with our payment specialists to discuss your business and your needs. If you already have a payment provider, send us your statements. We’ll analyze it for free to determine if you’re getting the most bang for your buck.

FAQs about accepting credit cards online

Q: How can I accept credit card payments online?

To accept credit card payments online, you need a merchant account with a provider like Payment Depot or Stax. Apply for an account, and once you’re approved, integrate their payment gateway APIs into your website or app, and securely process transactions. 

If you do not wish to go through the hassle of setting up a merchant account, you can choose to work with a payment processor. A payment processor will handle the authorization and settlement of credit card transactions, ensuring smooth and secure payment processing for your customers. 

Keep in mind, however, that working with payment processors makes you susceptible to sudden account holds and freezes. Merchant service providers, on the other hand, are more reliable because of their stringent upfront risk assessment procedures.

Q: Should my business start accepting credit card payments?

Yes, accepting credit card payments can enhance your business profitability by attracting more customers and increasing sales. It offers convenience and flexibility for your customers, potentially leading to higher customer satisfaction and loyalty. 

Additionally, it enables you to tap into online markets and streamline your payment processes. However, consider the associated fees and security measures to ensure they align with your business goals and financial capabilities.

Q: What is the fee for accepting credit card payments?

Credit card processing fees typically include interchange fees, assessment fees, and markup fees. In general, the overall fee for processing credit cards ranges from 1.5% to 3.5% of each transaction. 

You should also anticipate a flat fee per transaction, often around 10 to 30 cents, to be added too. Additionally, some processors may charge monthly fees or other incidental fees. Rates vary based on factors such as card type, transaction volume, and your processor’s pricing structure.

Q: What is a payment processor for credit cards?

A payment processor for credit cards is a third-party service provider that facilitates secure electronic transactions between merchants and customers. Payment processors take care of transmitting transaction data among the merchant, the customer’s issuing bank, and the credit card network. They handle tasks like authorization, settlement, and fund transfer for these transactions.

Q: How should I choose the best credit card processor for my business? 

To choose the best credit card processor, you need to consider factors such as transaction fees, contract terms, and security features. You should also compare the customer support capabilities of different payment processors. 

The type of business, size, and industry should also influence your decisions. Research different providers, read reviews, and compare their offerings to find the one that aligns with your business needs, budget, and growth goals.

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