Accepting Credit Card Payments Without A Merchant Account: 5 Best Options For Small Businesses
Need to accept credit card payments without a merchant account? Learn what third-party payment processing is and the pros & cons of our top 5 vendors.
Frank KehlFrank Kehl has been researching and analyzing merchant services, payment gateways, and international money transfer services since 2015. He has a Bachelor of Science degree from Penn State and a Juris Doctorate from the Ventura College of Law.
Expert Analyst & Reviewer
UPDATED
Advertiser Disclosure: Our unbiased reviews and content are supported in part by affiliate partnerships, and we adhere to strict guidelines to preserve editorial integrity.
In recent years, it has become much easier to accept credit cards without a merchant account.
Low-cost providers such as Square and PayPal have made it possible for businesses of all sizes to start accepting credit and debit card payments quickly and easily. While traditional merchant accounts are still the most common way for businesses to accept credit cards, they can be expensive and time-consuming to set up. Payment service providers (also known as third-party payment processors or payment facilitators) offer a more affordable and convenient alternative.
This article will explain how payment service providers work, review several of the top choices that we recommend, and explain how you can tell if a provider is the right choice for your business.
Can I Really Accept Credit Card Payments Without A Merchant Account?
Yes, you can accept payments online and in person without a merchant account. The easiest way to do so is by using a payment service provider (PSP), which is an easier alternative to traditional merchant account providers. PSPs aggregate all their merchants into a single account, eliminating the need for a time-consuming and paperwork-intensive underwriting process before your account can be approved.
How A Merchant Account Works
A merchant account is nothing more than a special bank account that temporarily holds money from credit and debit card transactions. Once transaction processing is complete and your provider has taken out its fees, the remaining funds are transferred to your business bank account. This approach comes with several advantages and disadvantages:
Pros
Unique Merchant Identification Number (MID) for each merchant
Lower risk of sudden account holds, freezes, or terminations
Can be less expensive overall at higher processing volumes than third-party processor
Cons
Extensive underwriting process required prior to approval
Often includes numerous additional monthly and annual fees
Usually more expensive than payment service providers for low-volume businesses
The Alternative: Third-Party Payment Processing
With a third-party payment processor, you won’t have your own separate merchant account with a unique Merchant ID Number.
Instead, your business will be aggregated with other users into a single, large merchant account. This approach cuts down your provider’s account maintenance costs significantly, allowing it to pass some of the savings onto you. Like a traditional merchant account, signing up with a third-party processor has its plusses and minuses:
Pros
No extensive underwriting process is required prior to approval
Usually includes no additional monthly or annual fees
Usually less expensive than traditional merchant accounts for low-volume businesses
Cons
Higher risk of sudden account holds, freezes, or terminations
It can be more expensive overall at higher processing volumes than a traditional merchant account
May lack advanced features or customization options available with merchant account
5 Best Options To Accept Credit Cards Without A Merchant Account
When it comes to accepting credit card payments without a merchant account, there are only a relatively small number of third-party processors that dominate this sector of the payments industry. Each provider offers some unique strengths (and a few shortcomings) and will be a great option for certain business types.
Our choices for the best third-party processors include Square, Shopify Payments, Stripe Payments, Venmo For Business, and PayPal.
Get a free card swiper from Square at no cost when you create a free account. Claim your card reader.
Pros
True month-to-month billing
Predictable flat-rate pricing
Very affordable card readers and terminals
Very cost-effective for small and seasonal businesses
Cons
Account stability issues
Not available to most high-risk industries
Can be expensive at high processing volumes
Square Features
Square was one of the first third-party processors to offer a way to accept credit card payments in-person. The original bare-bones mobile processing system has evolved into a fully-featured platform for POS, payments, and more products by Square for small businesses.
Major features include:
EMV and NFC-compatible mobile card readers
Square Terminal for in-person sales
Square Stand iPad-based POS system
Square Online Store for eCommerce businesses
Virtual terminal for keyed-in or in-person transactions
2.6% + $0.10 for swiped/dipped/tapped transactions
2.9% + $0.30 for online transactions
3.5% + $0.15 for keyed-in transactions
No monthly or annual fees
No monthly minimum
No PCI compliance fees
Why Square Is A Great Alternative To A Merchant Account
Square is the most feature-rich and advanced mobile processing (mPOS) solution you can find without a monthly fee or a monthly minimum.
Square’s simple flat-rate pricing makes it easy to predict your monthly processing costs once you’ve reached a stable processing volume. The company continues to expand its lineup of products and services, and now offers business sector-specific features, such as Square for Restaurants and Square for Retail. While many of these advanced features require an additional monthly subscription fee, they’re still usually much more affordable than comparable offerings available from competing providers.
Our one caveat regarding Square is that its flat-rate pricing works best for relatively low-volume businesses, but can actually be more expensive than a merchant account at higher processing volumes. If your business grows above approximately $5,000/month in credit and debit card sales, you should start looking to transition to a full-service merchant account.
Shopify is a very popular eCommerce platform that includes all the features you’ll need to set up an online business and start selling from your website. While you can use Shopify with just about any merchant services provider, Shopify Payments integrates directly with the Shopify platform and is very well-suited to fledgling eCommerce businesses. Key features include the following:
Omnichannel payments platform
Extensive developer tools
Integrated security and PCI compliance services
EMV and NFC-compatible card readers available
Shopify POS software available
Shopify Payments Pricing
Note: The following pricing information is for Shopify Basic, the company’s most affordable option. Discounted processing rates are available under the more expensive tiers.
2.7%/transaction (in-person)
2.9% + $0.30/transaction (online)
$39/month subscription fee (Basic tier)
Shopify Tap & Chip Reader — $49/unit
Additional fees apply for optional services
Why Shopify Payments Is A Great Alternative To A Merchant Account
Shopify has built an enviable reputation for providing an out-of-the-box eCommerce platform for entrepreneurs who want to start an online business but don’t want to get bogged down in technical details. Setting up Shopify Payments is easy to do.
Shopify’s easy-to-use interface helps merchants build a professional-looking website, with or without a coding professional.
Shopify currently offers five tiers of service (including the bare-bones Shopify Starter plan). Monthly fees range from $5 to $2,000+, with the more expensive plans including many additional features and services. All plans use flat-rate pricing, although the more expensive options have correspondingly lower per-transaction rates.
It’s also possible to use the Shopify platform with your existing payment processor, but you’ll have to pay an additional fee to Shopify for each transaction. Overall, Shopify Payments is an excellent option if you’re launching a new eCommerce business or adding an online sales channel to your existing retail business.
Extensive developer tools and customization options
Predictable flat-rate pricing
Multicurrency payments supported
Ideal for international merchants
Cons
Needs technical skills to implement
Account stability issues
Not available to high-risk businesses
Stripe Features
Stripe is the most advanced and customizable online payments platform in the industry but has also recently begun to expand into the retail sector as well. Here are the primary features it offers:
Integrated payments platform
Extensive online shopping cart compatibility
Advanced analytics and reporting tools
Robust set of developer tools for site customization
Stripe Radar anti-fraud detection service available
Support for in-person payments via Stripe Terminal
Numerous ancillary services available
Stripe Pricing
2.9% + $0.30/transaction (online)
2.7% + $0.05/transaction (in-person)
+1% + $0.30/international transaction
+1% for currency conversion (if needed)
0.8%/ACH transfer (maximum of $5.00)
No monthly fee
$15/incident chargeback fee
Additional fees for some optional services
Customized pricing available
Why Stripe Is A Great Alternative To A Merchant Account
For eCommerce or omnichannel merchants, Stripe offers the most sophisticated platform you can find, but you’ll most likely need either a developer or your own coding skills to take full advantage of all the capabilities it offers.
Stripe is one of the few providers we’ve found that combines transparent, small-business-friendly pricing with the kinds of advanced features you’d normally only find with a full-service merchant account.
It’s a great choice for almost any online business, regardless of size or processing volume. It’s also perfect for international businesses, as it’s available in most major countries around the world, supports a variety of local payment methods, and can process multicurrency transactions.
Transfer limits may be problematic for high-volume businesses
Venmo Features
While Venmo is best known as a peer-to-peer (P2P) money transfer service, it’s also become a popular way for merchants to accept payments outside of traditional merchant accounts. Venmo For Business is designed to allow businesses to accept payments using Venmo’s P2P network, and offers the following features:
In-person payments using QR codes and the Venmo mobile app
Online payments using PayPal Checkout or the Braintree payment gateway
QR Kit available (includes printed QR codes in multiple sizes for in-store use)
Venmo Pricing
1.9% + $0.10/transaction for purchases made using the Venmo app and a QR code
3.49% + $0.49/transaction for purchases made online or in-app using the Braintree gateway or PayPal Checkout
Purchases limited to $2,999.99/transaction
Total purchases limited to $24,999.99/week (or $2,499.99 without identity verification)
Transfers to your bank account limited to $49,999.99/week (or $999.99 without identity verification)
Transfers to your bank account limited to $50,000/transaction for instant transfers
Venmo QR Kit — $14.99 each
Why Venmo For Business Is A Great Alternative To A Merchant Account
Unlike our other third-party payment processors, Venmo won’t replace a merchant account, nor is it designed to. Venmo works best as an additional payment method you can offer customers that will save you money on credit card processing fees. For very small businesses or those that only take an occasional credit or debit card payment, it might be all you need.
If you’ve been relying on cash and paper checks to get paid, adding Venmo For Business gives you a way to accept payments without signing up for a third-party processor or a merchant account. The tradeoff for this simplicity, of course, is that you won’t get the kind of additional features that even a basic third-party processor can offer you, such as support for ACH payments or analytical data. You can use Venmo for online transactions, but you’ll have to sign up for either PayPal or Braintree to do so (note that Venmo and Braintree are both owned by PayPal).
An early eCommerce pioneer, PayPal enjoys near-universal name recognition and offers a complete payments ecosystem for just about any type of business. Highlights of the company’s services include the following:
Credit and debit card payment processing
Support for localized payment methods
Contextual checkout buttons
Hosted checkout page
Virtual terminal available (additional fee applies)
Recurring billing available (additional fee applies)
PayPal Pricing
As of August 2, 2021, PayPal has changed its pricing for online payment processing, affecting new and existing merchants. The new rates are complicated and not easy to summarize, so we recommend reading our article on PayPal’s pricing to understand how the new prices will affect your business.
PayPal’s revamped pricing structure is now much more complex than it used to be. Here’s a brief overview of the primary rates and fees you should know:
2.29% + $0.09 for mobile and in-person transactions
2.99% + $0.49 for online sales (standard plan)
3.49% + $0.09 for keyed-in transactions
3.09% + $0.49 for virtual terminal transactions
+ 1.5%/international transaction
$0/month for PayPal Checkout
$5/month for PayPal Payments Advanced
$30/month for PayPal Payments Pro
For a more detailed breakdown of PayPal’s pricing, please see our complete guide to PayPal’s merchant fees.
Why PayPal Is A Great Alternative To A Merchant Account
Despite its recent price increases, PayPal can still be a good option for many small businesses.
PayPal accounts don’t come with long-term contracts or early termination penalties, and even the company’s free service tier offers all the basic features an online business will need. Because of the pay-as-you-go nature of PayPal’s fee structure, many merchants use it as a backup payment acceptance method in addition to their primary provider.
However, if you’re thinking of using PayPal as your sole means of accepting credit and debit card payments, we strongly encourage you to take a careful look at the company’s new pricing structure. While some of the processing fees are competitive with what other third-party processors charge, many others are above industry averages and could cost you a lot of money if they apply to the types of transactions that you accept most frequently.
In addition to payment service providers, peer-to-peer (P2P) money transfer apps have made it easier than ever to send or receive a payment for personal or business transactions. Remember that all income must be reported to the IRS, even if you do not receive an IRS Form 1099-K. Here’s how the most popular services handle this issue:
Zelle
While Zelle is perhaps the easiest to use and most accessible P2P service available, it won’t be very helpful at tax time. Because it does not actually settle funds, Zelle maintains that it’s exempt from IRS income reporting laws. Although you can set up a Zelle For Business profile, you won’t receive an IRS Form 1099-K for any transactions, regardless of the amount. You should also be aware that not all banks that use Zelle offer it for business purposes, and those that do may or may not charge fees for business-related transfers.
Venmo
Like Zelle, Venmo offers P2P transfers for both personal use and business use through a Venmo For Business profile. Beginning with the 2022 tax year, Venmo will issue an IRS Form 1099-K for all transactions that exceed $600 and were processed through your Venmo business profile. Note that this includes multiple transactions from the same source that total over $600 over the course of the calendar year. As we’ve noted above, Venmo doesn’t offer a credit card reader but instead relies on QR codes to facilitate payments.
Square Cash App
Even if you’re not using Square as your third-party processor of choice, the Square Cash App can be a very handy way for some businesses to accept payments. While you can download the app and set up an account for free, be aware that any payments you accept that are funded with a credit card will incur a 2.75% processing fee. You’ll also pay a 3% fee if you want to add money to your Square Cash account using a credit card. You can also set up a Cash App Business Account to keep your business and personal transactions separate. Like other P2P services, Square Cash App is now issuing 1099-Ks for qualifying transactions, beginning with the 2022 tax year.
Square
Although it’s designed primarily for businesses, Square Payments can also be used by individuals who need to send or receive an occasional credit/debit card transaction. Square will report your income to the IRS and provide you with a Form 1099k, but only if you process more than $20,000 in gross sales from goods or services and more than 200 transactions in a calendar year.
PayPal
PayPal has had a long head start over other money transfer services in terms of features and tax reporting. While you could use your personal PayPal account for the occasional business transaction, you’d be solely responsible for accurately reporting your income to the IRS for tax purposes. You’d also miss out on all the additional features and services that PayPal offers to merchants. With the standard, no-frills PayPal Business accounts available with no monthly fees and no long-term commitment, you can easily keep your personal and business transactions separate by setting up a second PayPal account linked to your business banking account.
For more in-depth information on the tax implications of using peer-to-peer transfer services for business purposes, please refer to our article, which explains PayPal, Zelle, and Venmo taxes.
What To Look For If You Want To Accept Payments Without A Merchant Account
Like any other major buying decision, you’ll want to shop around before selecting a payment service provider for your business. All of the providers we’ve profiled above offer different products and services, so you’ll want to select a provider that best fits the needs of your particular business.
One thing these companies generally do not compete on is pricing. Almost all third-party processors offer true pay-as-you-go billing, with no long-term contracts or monthly fees for basic services. They also offer remarkably similar flat-rate processing rate plans. If you want to accept payments online without a merchant account, you can expect to pay the same 2.9% + $0.30 per transaction with any major third-party processor.
Here’s a brief overview of the major features you should evaluate before selecting a third-party processor for your business:
Processing Hardware
To accept in-person payments, you’ll need a credit card reader or terminal to swipe, dip, or tap the customer’s card. Third-party processors initially only supported mobile payments that required a smartphone and a very basic card reader. Square stands out here for its variety of low-cost, feature-packed card readers, terminals, and POS systems. At the same time, other providers can offer you a universal card reader or terminal that can be reprogrammed if you later decide to switch to a different processor.
Online Payment Support
To take payments online, you’ll need a payment gateway or virtual terminal. A payment gateway is a program that connects your online store to your provider’s processing network. A virtual terminal is a program that runs on your computer or mobile device, allowing you to manually enter credit card payment information or function as a terminal in conjunction with a compatible card reader. Note that most major payment gateways today include a built-in virtual terminal feature. Most third-party processors provide a free virtual terminal as part of your account (with the notable exception of PayPal, which inexplicably charges $30/month for this rather basic feature).
Alternative Payment Methods
Between the COVID-19 pandemic and recent increases in interchange fees, there is renewed interest in alternative payment methods that offer a contactless way to interact with customers and, more importantly, avoid paying costly credit card processing fees. Third-party processors have responded to this demand by offering increased support for popular alternative payment methods, including QR code payments, payment links, online invoicing, and echeck and ACH transfer processing.
Customer Support
Often overlooked because it’s so subjective, customer support after you’ve signed up for an account is one of the most important criteria in selecting a top-notch provider. Third-party processors have had a bad reputation in this area for years, with many of them not even offering telephone support until fairly recently. Square and other providers have made significant improvements in this area in the last few years, but you should still be prepared to make maximum use of self-help resources (usually published on the provider’s website) before reaching out to customer service for help with a problem.
Should My Business Accept Payments Without A Merchant Account?
Accepting credit cards without a merchant account is best accomplished by signing up with a payment service provider if your credit/debit card processing volume is below $5,000/month. Above that amount, we generally recommend a full-service merchant account as a more stable and less expensive option. Note that the monthly processing volume requirement isn’t set in stone. Other factors, including your average ticket size, specific hardware or software needs, and whether your business is seasonal will all play into this determination.
For merchants that have concluded that a third-party processor is their best choice, we recommend the following best practices:
Do look for a provider that offers month-to-month billing with no long-term contracts
FAQs: How To Accept Credit Cards Without A Merchant Account
How do I process a credit card without a merchant account?
The easiest way for small businesses to accept credit cards without a merchant account is by signing up with a payment service provider (PSP), such as Square, Stripe, or PayPal. These providers offer aggregated accounts that allow credit/debit card processing, but without the lengthy underwriting process required to approve a full-service merchant account.
How can I accept a credit card without a POS machine?
If you don’t have a POS system or a credit card terminal, your options for accepting credit cards in-person include a mobile card reader that pairs with an app on your smartphone or tablet, QR code payments, or manually entering the card details into a virtual terminal or mobile app.
How can I accept a credit card online without a merchant account?
You can accept online credit card payments without a merchant account by using a third-party payment processor, such as Square, Stripe, or Shopify. Peer-to-peer payment services like Venmo can also be used to accept digital payments as well.
Can I accept a credit card without a business?
Yes. You can use peer-to-peer payment services like Venmo, Zelle, and the Square Cash App to accept credit card payments for personal use. It’s also possible to sign up for a Square account for personal use, even if you don’t have a business.
In Summary: 5 Best Options To Accept Credit Cards Without A Merchant Account
Frank Kehl has been researching and analyzing merchant services, payment gateways, and international money transfer services since 2015. He has a Bachelor of Science degree from Penn State and a Juris Doctorate from the Ventura College of Law.
Let us know how well the content on this page solved your problem today. All feedback, positive or negative, helps us to improve the way we help small businesses.
Our Experts Recommend PaymentCloud 🏆PaymentCloud can help almost any business save on credit card processing.Whether you're looking to save money on processing or to get approved for a merchant account, PaymentCloud can help.Get StartedAt PaymentCloud
We Want Your Feedback!
Help us to improve by providing some feedback on your experience today.
The vendors that appear on this list were chosen by subject matter experts on the basis of product quality, wide usage and availability, and positive reputation.
Merchant Maverick’s ratings are editorial in nature, and are not aggregated from user reviews. Each staff reviewer at Merchant Maverick is a subject matter expert with experience researching, testing, and evaluating small business software and services. The rating of this company or service is based on the author’s expert opinion and analysis of the product, and assessed and seconded by another subject matter expert on staff before publication. Merchant Maverick’s ratings are not influenced by affiliate partnerships.
Our unbiased reviews and content are supported in part by affiliate partnerships, and we adhere to strict guidelines to preserve editorial integrity. The editorial content on this page is not provided by any of the companies mentioned and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author’s alone.
Reveal Featured Offer
Our Experts Recommend PaymentCloud 🏆PaymentCloud can help almost any business save on credit card processing.Whether you're looking to save money on processing or to get approved for a merchant account, PaymentCloud can help.Get StartedAt PaymentCloud
