The Small Business Owner’s Guide to EBT Payments

The Small Business Owner’s Guide to EBT Payments

If you’ve ever had a customer ask if you take SNAP at your small business, then it’s time for you to become familiar with EBT payments. “EBT” stands for “Electronic Benefits Transfer.” It’s what the federal government uses to distribute SNAP and TANF funds to families and individuals in need.

Becoming an EBT merchant is a great way to expand your customer base. However, there are a few things you need to know to determine your eligibility to become an EBT retailer. So, let’s discuss the ins and outs of EBT payments including what they are, how they work, and the costs and regulations of EBT processing.

What are EBT payments?

EBT acceptance works a lot like running any other type of credit card or debit card. Fortunately for you, however, processing costs are lower than credit or debit transactions. 

There’s a common misconception that only grocery stores, farmer’s markets, and convenience stores are eligible to accept EBT transactions. But EBT payments aren’t just for food and nutrition services.

Government assistance programs such as TANF can also give families access to funds for purchases beyond eligible food.

Understanding the terminology

For SMBs, accepting EBT payments is a great way to boost sales and access new customers.

Government programs offer various types of temporary assistance for low-income families and individuals. The following four programs may pertain to customers using EBT card payments.

  • WIC The Special Supplemental Nutrition Program for Women, Infants, and Children provides food, healthcare referrals, and education to mothers and children. This program helps low-income families secure proper nutrition.
  • SNAP The Supplemental Nutrition Assistance Program benefits needy families. Almost 40 million people have received SNAP benefits in FY 2020. Its budget was recently increased due to the coronavirus pandemic, so it’s a great time to become a SNAP retailer through the FNS, the USDA’s Food and Nutrition Services section.
  • TANF – Temporary Assistance to Needy Families is a state-run, federally funded program. It provides grant funds to states for families that need financial assistance and/or other support.
  • P-EBT The Pandemic Electronic Benefit Transfer (or Pandemic EBT) gives school children temporary food benefits on EBT cards used to purchase food items. P-EBT benefits apply to eligible children who would have got free or reduced-price school meals under the National School Lunch Program if their schools weren’t closed due to the COVID-19 pandemic. P-EBT also provides SNAP benefits to children whose child care facilities are closed due to COVID.

EBT payments are a great alternative to food stamps. For the federal government, they’re a more easily trackable payment system. Government programs like Social Security are independent of the federal government. Some are run by the states, others by the FNS.

Infographics Ebt Payments 1

Read more about Understanding the Payment Processing System.

How does EBT work?

EBT payments are run a lot like credit or debit cards. Customers swipe their cards to make purchases at retailers’ POS stations. When they do, the cost of the purchase is deducted from their account and put into the merchant account

As of now, EBT cards are magstripe only. But the federal government has stated that they hope to make the move to chip payments in the near future.

The key difference, however, is that customers can’t withdraw cash from their EBT account. The state and federal governments are pretty strict about how EBT payments can be used. Only specific purchases, such as food, clothing for interviews, etc. are allowed, and every customer’s account is different.

The benefits of accepting EBT payments

The biggest benefit of accepting EBT payments is exposing your business to a whole new customer base (e.g., SNAP recipients). It gives more customers a way to pay for their purchases at your point-of-sale machine. 

EBT payments are run much like a debit card with a magnetic stripe. However, you do need to acquire the right processing equipment to offer EBT merchant services.

EBT payments are currently only processed in person with the card present, but this will change as the technology evolves.

How to become an EBT retailer: Regulatory requirements

To become an EBT retailer, you’ll need a bank account, debit card payment processing hardware, and an FNS number. The cool thing is that you can process EBT transactions just like a pin debit transaction, on the same hardware. The challenge is applying and getting registered with your USDA FNS number.

Want to begin accepting EBT cards at your small business? There are a few steps you’ll need to put in motion:

  1. First, you’ll need to apply for an eAuthentication Account with the FNS.
  2. Then you’ll fill out an application with the FNS for a permit.
  3. After a waiting period (of up to 45 days), you’ll receive a seven-digit account number from the FNS.

Keep in mind that not all providers that apply to process EBT payments get approved. Your sales will need to be comprised of 50% or more of approved food in core nutrition categories. Fortunately, you can complete most of the application process online. It is pretty intuitive, and they guide you through each step.

Infographics Ebt Payments 2

What are the costs of EBT credit card processing?

Like with all other credit card processing, you will be charged a small fee to process EBT transactions. As long as your card reader has a pin pad for debit transactions, you won’t need to purchase new hardware.

The pricing of EBT transactions is another plus. EBT payments are much cheaper to process than traditional credit or debit card transactions. You don’t have to pay interchange fees or fees to the card company. Some payment processors, however, still charge a markup for every EBT swipe.

Here’s a list of providers approved by the FNS to process EBT payments.

Is accepting EBT the right choice for your small business?

The answer to this question depends on what you sell and your core customer base. EBT is great for grocery stores, convenience stores, farmer’s markets, co-ops, or any other food-centric business. 

If your SMB is apparel and accessories only, on the other hand, you probably won’t get approved by FNS. It’s essential for food-centric businesses to be EBT optimized to avoid the negative PR of rejecting customers receiving government aid.

Moving forward with EBT payments

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There are many aspects of running a business that you can’t control. Like whether the FNS approves your EBT payment processing application. On the bright side, you can make the choice to chip away at your payment processing fees.

Payment Depot is the highest-rated payment processor in the business. A registered ISO with Wells Fargo, we can help you save 40% or more on payment processing. So regardless of whether you get approved to process EBT transactions, you can still start saving money on payment processing. Get in touch with Payment Depot’s award-winning customer service team today to learn more!


FAQs about EBT

Q: What does EBT stand for, and how does it work?

EBT, or Electronic Benefits Transfer, is a system used by the federal government to distribute SNAP and TANF funds to families and individuals in need. EBT acceptance works a lot like running any other type of credit or debit card. Customers swipe their cards at retailers’ POS stations, making purchases, where the cost of the purchase is deducted from their account and put into the merchant’s account.

Q: Can a small business owner become an EBT merchant?

Yes, small business owners can become EBT merchants. It allows them to expand their customer base, boost sales, and reach new customers. While not all businesses will be eligible, it is a common misconception that only grocery stores, farmer’s markets, and convenience stores can accept EBT transactions. There are a variety of items EBT payments can be used for, not just food and nutrition services. Businesses need to apply for an eAuthentication Account with the FNS and fill out an application for a permit. Approval is given after a waiting period of up to 45 days.

Q: What are the main government assistance programs related to EBT payments?

There are four main programs related to EBT card payments: WIC (The Special Supplemental Nutrition Program for Women, Infants, and Children), SNAP (The Supplemental Nutrition Assistance Program), TANF (Temporary Assistance to Needy Families), and P-EBT (The Pandemic Electronic Benefit Transfer). These programs offer varying levels of temporary assistance for low-income families and individuals.

Q: What are the regulations associated with EBT payments?

EBT payments can only be used for specific purchases, such as food and garments meant for interviews, with each customer’s account having different allowances. EBT accounts don’t permit cash withdrawals and are currently processed only in person with the card present.

Q: What are the benefits and costs of accepting EBT payments for businesses?

One significant benefit of accepting EBT payments for businesses includes exposure to a new customer base (e.g., SNAP recipients). As for costs, EBT transactions are cheaper to process than traditional credit or debit card transactions as businesses don’t have to pay interchange fees or fees to the card company, although some payment processors might charge a markup for every EBT swipe.

Q: Who can approve a business to become an EBT retailer?

The Food and Nutrition Services (FNS) department of the USDA has the authority to approve businesses to become EBT retailers. Businesses interested in accepting EBT payments need to apply for an eAuthentication Account with the FNS and then fill out an application for a permit. Successful applicants will receive a seven-digit account number from the FNS.

Q: If I operate a small business, should I consider accepting EBT payments?

Whether or not a small business should accept EBT payments depends on what the business sells and its core customer base. For instance, EBT is an excellent option for grocery stores, convenience stores, farmer’s markets, co-ops, or any other food-centric business. In contrast, businesses that only sell apparel and accessories may not get approved by the FNS. However, businesses that qualify find EBT an efficient way to expand their customer base.

Q: How do you accept EBT payments at a small business?

To begin accepting EBT cards at your small business, you first have to apply for an eAuthentication Account with the FNS. This is followed by filling out an application with the FNS for a permit. After a waiting period of up to 45 days, you receive a seven-digit account number from the FNS. However, not all applicants get approved. Your sales need to constitute 50% or more of approved food in core nutrition categories.

Q: What are the technology requirements to process EBT payments?

EBT payments are processed much like a traditional debit card with a magnetic stripe. Businesses do need to acquire the right processing equipment to offer EBT merchant services. As long as your card reader has a PIN pad for debit transactions, no additional hardware purchases are required.

Q: What are EBT cards?

EBT cards are like credit or debit cards given to individuals who apply to government-assisted programs like SNAP and TANF. The cards are loaded with the assistance budget and can be used to purchase eligible items. Currently, EBT cards are magstripe only, but a move to chip payments is anticipated in the near future by the federal government.


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