Do You Really Need a Merchant Account?

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The short answer is yes, but there’s more to it than that…

The Statistics

credit-card-usage-statisticsAccording to the U.S. Census Bureau, there will be a projected 181 million credit card holders living in the country this year. That’s over half the population. I could get into even more detail about the numbers, but it’s pretty obvious that if you don’t allow your customers to pay with credit cards, you’re probably missing out on quite a bit of business.

However, there’s a problem…

The Dilemma

do-i-need-a-merchant-accountWhether you’re just getting started with your first e-Commerce store, or expanding your brick-n-mortar shop into the online world, you’re going to face the same question. Do I sign up for a merchant account right now?

A better question to ask yourself is; “will the increase in sales that I obtain by allowing my customers to pay via credit card, exceed the costs that will be associated with offering that option in the first place?”

Even if you don’t process any transactions for any given month, you still have to pay some sort of monthly fee. There are payment gateway fees, statement fees, monthly minimum fees etc…, so it’s possible that you’ll have to shell out as much as $60/month just for the ability to process credit cards. Not to mention, some providers will require you to leave a percentage of your sales revenue with them as a sort of insurance policy against chargebacks, fraudulent charges or bankruptcy (see “rolling reserve”). To top it all off, there’s always the possibility of having your funds withheld by the bank due to any number of risk-related issues.

As a bootstrapping merchant, just adding an extra $60/month in overhead might be enough to put you out of business, let alone having to cover a rolling reserve. So, you better be sure that you’ll be able to handle the possible financial burden that will accompany a merchant account.

If you’re a small business, and you’re just developing your online presence, chances are that it’ll take some time before you have enough sales or cashflow to justify the cost for merchant services. But the problem is, that without the ability to process credit cards, you’ll probably miss out on those same sales that are supposed to help you grow to that level of justification. It’s a typical Catch-22.

Your solution…

The Third-Party Payment Processor

third-party-transactionI personally like taking things in steps. Third-party payment processors will allow you to do just that.

Third-party payment processors like Paypal and Google Checkout allow you to add the Visa and Mastercard payment option to your website without burdening you with the costs of a traditional business merchant account. They just charge you a percentage of the transaction, and that’s it. No recurring monthly fees.

*Note: Paypal does have a merchant account option (Website Payments Pro), but I’m not talking about that, I’m talking about their simple third-party platform (Website Payments Standard). The platform that requires you to send your visitor over to Paypal in order to make a payment, instead of allowing you to process them directly on your own website.

Once you add that functionality, you can then monitor your sales. Have they increased? How many visitors are paying via credit card? Can you afford a merchant account now?

Personally, I would get setup with something like Paypal and let it run for a few months. I’d let my traffic grow, let my sales grow and stabilize, save up some money, then I’d start shopping for a merchant account. That way, you’ll have enough reason, and hopefully enough cashflow to take that next step.

FeeFighters has a pretty cool calculator that’ll help you compare costs between Paypal and a traditional merchant account. Definitely worth a look.

Here are some well known third-party payment processors. Keep in mind that I haven’t done any research on any of these companies just yet, but I do plan on adding reviews for all of them soon:

  • Paypal
  • Google Checkout
  • 2Checkout
  • CCNow
  • Amazon Check Out

Did this information help? Have questions? Let me know.

Amad Ebrahimi
Amad has worked in the eCommerce and online marketing world since 2002. He started as an eBay seller, then slowly graduated to building & marketing his own websites and consulting others to do the same. He founded Merchant Maverick out of frustration with all the misinformation and shady tactics that he encountered when trying to find a merchant account for his and his client's businesses. He's the man behind most of the merchant account reviews, and articles posted on Have any questions related to credit card processing? Talk to him.
Amad Ebrahimi
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    Thanks for the article.
    I am planning to start a business that is similar to crowdfunding businesses like honeyfund and kickstarter. Few questions:
    – In this business, creators will attach their bank accounts to their project and other people (funders) will be funding projects online. I will be taking a cut/commission of the overall transaction amount. I am wondering if I need a merchant account to run something like this. If yes, do I just connect it to my bank account?

    Also, in the scenario where A and B are funding C’s project, will stripe hold the money until C’s project has achieved its goal or will the money be sent right away?

    Much appreciated!

      Jessica Dinsmore

      Hi Ricky,

      You get to decide how payouts will work, so Stripe should meet your needs. Here is a good article on building a crowdfunding platform. Good luck to you!


        I am planning to open an online store? I am making my own website for the store. Plz recommend me the best suitable payment gateway for my business. I don’t have a PayPal account.

          Jessica Dinsmore

          Hi Adnan,

          Thanks so much for writing! I would need more information to make a recommendation specific to your situation, however we actually have an article that I think will help you. Check out The Top 5 Payment Gateways For Online Credit Card Processing and please let me know if you have any additional questions! Thanks!


            A great and compact article of payment gateway functionality, which enables me to understand its functionality. Thank you.


              I’m in the country that is not supported by Paypal so which payment method can I use if I use woocommerce?
              Thanks 🙂

                Jessica Dinsmore

                Hi Sochivin,
                Check out Woocommerce’s payment gateway page, and select your country to see what options are available to you. Hope this helps!


                  I am Planning to Start a Ecommerce Site which deals in Office Equipment. Need your help that what are the things i need to first to accept credit card on website. I am not in US & my target market is USA.

                    Chloe Bahal

                    Hi Osama,

                    I would recommend taking a look at Instabill.


                      From the extensive research I’ve done here on your site it would seem that one of these options is the way to go for me. I own a small yoga studio that I would like to grow and am hoping that by offering online payments plus a booking service I will increase student attendance. Income is around $800/month now. By increasing the number of classes and workshops offered I hope to get that up to $2,000-plus within the next 6 months.

                      Currently I am looking at – they have a pay-as-you go option with a minimum monthly payment of $15. However, they require plus a merchant – not the cheapest option out there.
                      My WordPress website comes with WooCommerce – clients can shop for class packages, etc., and I think that tthis option can work with Paypal (this is a gateway and merchant, am I right?), if not I’ll need gateway and merchant for this option too.
                      In this case I will still need booking software for students to be able to reserve their spot in a scheduled class-time.

                      Do you have knowledge of a better solution for my business?

                      Thanks in advance,

                        Tom DeSimone

                        Hi Charmaine,

               looks extremely expensive. Unless they are providing you with something very special, I think you should look elsewhere.

                        I think using WooCommerce is a good idea. Woo integrates with a ton of different gateway and merchant account providers. PayPal would be a simple all-in-one solution, and with your volume it’s would probably be the best fit.

                        In terms of booking software, you have a bunch of options – all of which will be way less expensive than YogaReg. Check out Appointy to start, and then look at some of our other favorite booking software reviews.

                        Hope this helps. If you need more help choosing, get in touch!

                        Good luck,


                          As an FYI, the link that you posted for the fee-fighters paypal calculator, it takes you to….

                            Amad Ebrahimi

                            Thanks Tyler,

                            FeeFighters was bought out by Groupon a while back. Looks like the calculator is no longer active.


                              What about or a top-tier provider like braintree?


                                I agree with Mo, I would be EXTREMELY interested to see an informed, trustworthy comparison of PayPal, Google Checkout and Amazon Check Out in particular.


                                  I’ll be very interested to see how you think the options listed above measure up in a comparison. Your site is awesome!


                                    Don’t forget Amazon check out.

                                      Merchant Maverick Admin

                                      Thanks for the recommendation Chris. I added them to the article.


                                        Have you used Amazon Check Out? If so, how do you like it?

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