How to Select the Best Merchant Account Services Provider for Your Business

How to Select the Best Merchant Account Services Provider for Your Business

The United States’ credit card industry continues to show steady growth. In April 2022, Insider Intelligence reported that in-store credit card payments are expected to reach almost $2.336 trillion in 2022. eCommerce sales are projected to propel online transaction volumes to more than $500 billion during the same year.

Merchant Account Services_In-Store Card Payments_Infographic

A business’s merchant services provider (or MSP) handles the processing of in-person payments and eCommerce sales. Each company should select an MSP that works with other businesses in that industry. Choosing the best MSP for the business stage is also important.

Let’s take a look at what’s involved in choosing the right merchant services provider.

What Is a Merchant Service Provider?

Think of a merchant services provider (or MSP) as your one-stop shop for credit card processing services. An MSP may also be called a merchant account services provider.

An MSP provides each small business with a merchant account. This account enables each business to accept credit cards and debit cards via card-present transactions. Visa, Mastercard, American Express, and Discover are the four major card brands.

Many brick-and-mortar retailers’ POS systems accept other payment types such as Apple Pay and Google Pay. These contactless payment apps utilize higher-security near-field communication (or NFC) technology.

The MSP also coordinates card processing with entities such as the card-issuing bank and payment gateway. eCommerce businesses must have an electronic payment gateway to process a customer’s online payment. Some MSPs also accept payments in foreign currencies.

Finally, the merchant services provider furnishes each client with products and services required for their card processing activities. Examples include a point-of-sale system, credit card terminal, card reader, mobile card reader, and virtual terminal. MSPs don’t handle Automated Clearing House (or ACH) payments, which are bank-to-bank funds transfers.

Why Do You Need One?

Naturally, you’d like to receive your business’ net sales proceeds without delay. So you may wonder why these funds can’t be deposited directly into your business bank account. In other words, you want same-day funding.

So why is it necessary to hold the funds in a merchant account?

Your merchant services provider utilizes this two-step process to minimize their risks. There’s always a chance of a failed transaction or credit card fraud. Alternatively, a customer could initiate a chargeback request for a previous transaction. Your payment processor keeps those funds in the merchant account until those issues have been resolved.

Three Types of Merchant Accounts

Merchant services providers collectively offer three types of merchant accounts. Some providers specialize in one type of merchant account.

1. Dedicated Merchant Account

Some merchant services providers issue each client a dedicated merchant account. These full-featured accounts must go through the underwriting process, so they take longer to establish.

2. Aggregate Merchant Account

A payment services provider (or PSP) maintains an aggregate merchant account. Multiple businesses’ sales proceeds are deposited into the PSP’s master merchant account. From there, the PSP transfers the appropriate net proceeds to each business’ checking account. Square and PayPal are two well-known payment service providers.

Business owners can quickly obtain an aggregate merchant account without underwriting. However, these accounts are at higher risk of unexpected holds, freezes, or even terminations due to suspicious activity.

3. High-risk Merchant Account

Vape shops, CBD retailers, and certain other businesses are considered high-risk applicants. A high-risk merchant will only qualify for an underwritten merchant account with a long-term contract and higher rates and fees.

Merchant Account Services_Merchant Account Types_Infographic

Why Is Your Choice of Merchant Service Provider so Important?

Your merchant services provider selection directly affects your business’ bottom line. Choosing a provider that doesn’t fit your business means you’ll pay unnecessarily higher fees. If you’re locked into a long-term contract, you’ll be trapped in that pricing structure for several years.  

How to Select the Best Merchant Service Provider for Your Business

Finding the best merchant account services provider isn’t a decision you should make lightly. Determine what’s important for your business and research MSP candidates before making a decision. Once you complete the setup process, you can begin to process payments.

A well-regarded merchant services provider will feature an impressive package of positive attributes. Choose the MSP that best meets your business needs at an affordable price.

1. Support for All Payment Types

Every merchant services provider should support all commonly accepted payment types. Besides EMV chip-enabled credit cards and debit cards, the provider should accept loyalty cards and gift cards. Plus, many customers prefer contactless payments and mobile payments.

2. Extensive Hardware Availability

Full-service merchant services providers should be able to accommodate any business’ card processing hardware needs. Brick-and-mortar businesses often use card terminals and multi-featured point-of-sale systems.

These coordinated systems should support EMV payments and NFC contactless payments. Many retailers and restaurants also utilize wireless payment terminals.

Field-based business owners (such as plumbers and mobile dog groomers) depend on mobile payment hardware. These systems integrate the user’s smartphone with a simple card reader. Some mobile payment systems also support EMV payments.

Some merchant service providers include basic hardware as a promotional sign-up bonus. Others offer introductory equipment pricing. Equipment leasing is highly discouraged. A contract-based equipment lease would cost far more than buying the hardware outright.  

3. Data Security and Fraud Prevention

Credit card fraud continues to impact businesses of all sizes and types. Data breaches can expose customers’ card information to fraudsters and other cybercriminals.

A forward-thinking merchant services provider should take steps to achieve safer credit card transactions. The MSP should ensure that they adhere to PCI compliance (or payment card industry compliance) standards. These protocols are designed to protect customers’ highly sensitive personal data.

A reputable MSP should keep multiple higher-level fraud prevention measures in place. Examples include encryption, tokenization, hosted payments, and targeted fraud management tools.

4. Ease of Use

Ideally, a merchant services provider’s website should be easy to navigate and should provide well-rounded information. Even a less-experienced computer user should be able to easily complete basic card processing operations without technology experts’ help.

5. Favorable Pricing Model

An MSP’s pricing model provides the foundation for your business’ card processing activities. This model is based on transaction interchange fees paid to the credit card brand (e.g. Visa) and the card-issuing bank. The interchange fees are based on interchange rates.

After paying these two entities, the payment processor keeps the remainder of the interchange fees. The MSP uses one of four pricing models to pass the fees to your business.

Interchange-plus Pricing

The interchange-plus pricing model includes the interchange fee and the processor’s markup (its portion of the fee). This pricing structure is transparent and fair but may not be the least expensive one.

Flat-rate Pricing

Many eCommerce-driven merchant services providers use a flat-rate pricing model. Here, each transaction is assessed at a flat percentage rate plus a specific transaction fee. Flat rates are higher than interchange-plus rates, but you’ll pay a lower monthly fee and other fees.

Tiered Pricing

The tiered pricing model includes qualified, mid-qualified, and non-qualified sales. Most transactions end up in the higher-priced mid-qualified or non-qualified tiers. Merchants should steer clear of MSPs with tiered pricing.

Membership-based Pricing

Here, each small business client pays a monthly membership or subscription fee for the MSP’s services. The MSP provides favorable processing rates and doesn’t nickel-and-dime the business with fees. Payment Depot uses the membership-based pricing model.

Merchant Account Services_Pricing Models_Infographic

6. Minimal Service Fees

Merchant services providers are notorious for charging merchants numerous account-related fees such as:

  • Account setup fee
  • Monthly fee
  • Statement fee
  • Monthly minimum fee
  • Service fee
  • PCI compliance fee
  • PCI non-compliance fee
  • Chargeback fee
  • Early termination fee

The MSPs do not always display the fees on their websites. In addition, the company’s sales associates do not always disclose them in sales calls. Some technology-focused MSPs (including Payment Depot) offer accounts with minimal fees.

7. Fair Contract Practices

The credit card processing industry’s contract practices have a rather tarnished reputation. When a business owner applies for a merchant account, they are frequently locked into a three-year contract.

Plus, an often-overlooked automatic renewal clause tacks on an extra year if you don’t cancel before the renewal date. Businesses who escape the contract early are generally charged a hefty early termination fee (or ETF). Some payment processors also hit the fleeing business with liquidated damages charges.

Thousands of merchants have complained about these shady contract practices. Today, many customer-centric payment processors operate with month-to-month contracts with no ETFs or other penalties. Payment Depot uses this small-business-friendly contract structure.

8. Easy System Integrations

Today, card-accepting businesses seek merchant services providers who can seamlessly integrate payments with their existing business software. For example, businesses using QuickBooks can automatically import sales data into their accounting programs.

Stated another way, the integrations universe is expanding every day. Businesses should ensure that an MSP candidate can support a prospect’s existing business software.

9. Seamless Scalability

Let’s say your growing business wants to add more payment options over time. Look for a merchant services provider that offers diverse payment solutions plus favorable terms for higher-volume processing. The MSP should also be able to accommodate businesses that add more locations or have additional business needs.

10. Excellent Customer Support

Good customer support (and technical support) are worth their weight in gold. Look for a merchant account provider offering round-the-clock assistance via email, phone, and/or chat. This is especially important for eCommerce business owners serving customers in varied time zones.  

5 Best Merchant Service Providers for Small Business Payment Processing

Dozens of merchant services providers jockey for customers in today’s competitive marketplace. Here are five top-tier MSPs worth consideration.

Payment Depot

Payment Depot’s membership-based pricing model features a month-to-month contract, no add-on fees, and no early termination fees. With rates based on processing volumes, higher-volume businesses will save money on processing fees. All members can access a dedicated account representative who can help solve problems quickly. Also, Payment Depot is known for its excellent customer support.


With Stax, merchants can choose membership-based wholesale pricing with low processing rates that benefit higher-volume businesses. This MSP also offers invoicing capabilities and online store integration with the Stax platform. Stax enjoys high ratings on numerous review platforms.


Clover offers three pricing plans, and the platform also charges a monthly service fee. The company’s full-featured point-of-sale system has duplicate capabilities on its virtual terminal and mobile app. Business owners can run most parts of their business on Clover’s POS software system. Clover also integrates with more than 500 other apps.


Square’s transparent pricing, no monthly or ETF fees, and no chargeback fee make it a popular choice. Users can access wide-ranging POS features via the iPhone or Android apps. Startup businesses often prefer Square because of its fast application process. Easy approvals mean businesses can begin accepting customers’ card payments quickly.


Stripe serves eCommerce store owners and others who want to make (or receive) online or in-person payments. Software platforms, marketplaces, and subscription services are among Stripe’s clients. The brand’s full-featured software features customizable checkout, recurring billing, and advanced invoicing features. Numerous integrations are also available.

Choosing the Right Merchant Service Provider

Payment Depot Highest Rated Processor_Banner

A small business-friendly merchant services provider can be a valuable business partner. Payment Depot has received highly positive reviews for its membership-based pricing and month-to-month agreements with no cancellation penalties.

Equally importantly, Payment Depot’s merchants are not bombarded with unnecessary fees. As a bonus, the company’s customer service is top-notch in the industry. Contact us today to learn how you can save hundreds of dollars on credit card processing every month with Payment Depot.


How Does Credit Card Processing Work?

A credit card transaction begins when a customer swipes, dips, or taps their card at the merchant’s terminal. The merchant’s payment processor sends the customer’s data to the issuing bank to ensure that sufficient credit is available. The issuing bank issues an approval or denial. Then, the merchant completes the sale or asks the customer for another form of payment.

What is a Merchant Account?

A merchant account is a special bank account that receives your business’ sales proceeds from payment processing transactions. Your payment processor deposits these funds and deducts applicable transaction processing fees.

From there, the processor transfers the net proceeds into your business checking account. The entire process generally takes place within a couple of business days. Some processors may provide your funds on a next-day basis.

What is eCommerce Processing?

eCommerce payment processing is a straightforward operation. To begin, the customer enters their payment details at checkout. Next, an electronic payment gateway routes the payment information to the payment processor.

The processor determines whether the customer has funds available for the purchase. If the sale is approved, the sales proceeds are deposited into the business’s merchant account. If denied, the customer will be asked to submit another form of payment.

Want to save 40% on payment processing? Let's Talk!