The Retailer’s Guide To Accepting EBT Payments
EBT (Electronic Benefit Transfer) is a payment system designed to allow its recipients access to assistance under SNAP (Supplemental Nutrition Assistance Program), TANF (Temporary Assistance to Needy Families), or other aid programs sponsored by the Federal and state governments to buy food and goods. EBT replaces the old “food stamps” program, allowing recipients to use a convenient and secure magstripe card similar to a PIN debit card to make their purchases.
For merchants, accepting EBT payments allows you to expand your customer base, and processing costs for EBT transactions are significantly lower than they are for traditional debit and credit cards. However, there is some paperwork involved, and you’ll need to have your equipment programmed to accept these types of payments. Note that while the SNAP program applies primarily to grocery stores, farmers’ markets, and some restaurants, the EBT system also supports authorized retail purchases by TANF recipients. In other words, if you’re a traditional retail merchant, you might still want to add EBT payments to your merchant account to support customers using this payment method.
In this article, we’ll walk you through the process of applying to become an authorized EBT retailer and discuss the hardware requirements you’ll have to meet before you can accept EBT payments. We’ll also discuss the processing costs associated with EBT payments and how they differ from regular PIN debit and credit card transactions. Finally, we’ll recommend some top-rated merchant service providers that offer support for EBT payments at a fair and reasonable cost.
While most providers offer EBT processing, only the truly top-notch companies can offer the right combination of fair pricing, transparent sales practices, a full lineup of modern hardware and software, and high-quality customer support that sets them apart from the endless number of mediocre providers in the processing industry.
Read more below to learn why we chose these options.
Table of Contents
- What Does EBT Include? Your Guide To SNAP, Food Stamps, & Other Key Terms
- Accepting EBT For Retailers: Regulatory Requirements
- How To Get An EBT Card Reader
- How Much Does EBT Processing Cost?
- The 4 Best EBT Processing Companies
- Is Accepting EBT In My Store The Right Choice?
- In Summary: The 4 Best EBT Processing Companies
What Does EBT Include? Your Guide To SNAP, Food Stamps, & Other Key Terms
The EBT system provides a secure payment method for recipients of several government assistance programs, including those administered by the federal government and those run by individual states. Here’s a very brief overview of the major assistance programs that use the EBT system:
- SNAP: The Supplemental Nutrition Assistance Program (SNAP) provides nutrition benefits to supplement the food budget of needy families, so they can purchase healthy food and move toward self-sufficiency. SNAP is a federal program administered by the USDA’s Food and Nutrition Service (FNS).
- WIC: The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) safeguards the health of low-income women, infants, and children up to age five who are at nutrition risk by providing nutritious foods to supplement diets, information on healthy eating, and referrals to health care. WIC is a joint federal/state program, where the federal WIC program provides grants to state governments to disburse through their networks.
- TANF: Temporary Assistance for Needy Families (TANF) is a federally-funded, state-run benefits program. Also known as welfare, TANF helps families achieve independence after experiencing temporary difficulties. At the federal level, the US Department of Health & Human Services administers the program. Each state government has its own program to disburse benefits. For example, in California, TANF benefits are distributed through the CalWORKS program.
Accepting EBT For Retailers: Regulatory Requirements
Like any government-sponsored program, you’ll have to wade through a fair amount of bureaucracy before you can accept EBT payments in your business. However, the registration process is pretty straightforward and doesn’t require an undue amount of effort on your part. In fact, you can complete all requirements online in most cases.
The US Department of Agriculture’s Food and Nutrition Service (FNS) administers the SNAP program. The first thing you need to do is obtain a permit (usually called either a SNAP permit or an FNS permit) from FNS. These permits are available to any qualified business that meets the appropriate statutory criteria and submits an application (with supporting documentation). To be qualified for a SNAP permit, your business must meet at least one of the following criteria:
- Your business sells staple foods in the following four categories: (1) dairy, (2) breads, grains, and cereals, (3) fruits and vegetables, and (4) meat, fish, and poultry. At least two of these categories must include perishable foods; or
- One or more staple foods account for over 50% of your gross retail sales.
Are you qualified? Good! Simply point your browser to the FNS website, and you can get started. Before you can apply for a SNAP permit, you’ll need to establish an eAuthentication Account with the FNS to verify your identity. This step can be completed online in just a few minutes.
Once you have an eAuthentication Account, you’ll need to fill out and submit both an application and supporting documentation. After your eAuthentication Account is approved, you’ll have 30 days to complete and submit the application and all supporting documents. The application itself can be completed online in as little as 15 minutes, but it asks for a lot of information about your business that might require you to do a deep dive into your records for specific answers. Supporting documentation is also required, including the following items:
- A copy of your current business license
- Copies of your driver’s license, passport, or other photo identification
- Copies of your Social Security cards (this includes all owners, partners, officers, shareholders, and their spouses)
- Your bank’s name and address
- Your merchant account provider’s information (including name, phone number, address, and website)
This information can be uploaded online or printed out and mailed to the FNS. In either case, the approval process can take as long as 45 days to complete. During this time, you won’t be able to accept SNAP payments.
When you’ve completed the registration process and been approved for a SNAP permit, you’ll be issued a seven-digit FNS Account Number that identifies you as an FNS-approved business. While that’s pretty much it for the paperwork requirements, you’ll still need to reconfigure your processing equipment to accept SNAP payments. See below for details.
Here are some additional considerations regarding SNAP permits:
- In addition to traditional grocery stores, SNAP permits are also issued to qualified farm stands and farmers’ markets.
- If you’re a Multiple Store Owner (MSO), you cannot use the online application process. Instead, an FNS representative will work with you directly to get your permit approved. The FNS defines a Multiple Store Owner as a business entity that owns 10 or more eligible retail food stores.
- Only approved food items may be purchased with SNAP funds. Hot food, restaurant food, alcoholic beverages, pet food, and other non-food items are not allowed. (Note that some of these items may be purchased with TANF funds.)
Numerous special rules apply to SNAP payments that you’ll want to be familiar with. Here are the most important considerations:
- Payments must be for SNAP-approved food items only
- No cash back may be issued
- No cash refunds may be issued
- The customer must present their EBT card and enter their PIN at the time of payment
At the moment, EBT programs are entirely based on in-person sales using a card-present payment method. However, as eCommerce continues to grow across the US, pilot programs are being started to expand the use of EBT payments to the online environment. Eventually, we anticipate that recipients of these programs will be able to access online payments as regularly as most other consumers already do.
How To Get An EBT Card Reader
In addition to registering with the FNS and obtaining a SNAP permit, you’ll need to acquire and set up the appropriate processing hardware. While most popular terminals are compatible with EBT payments, you need to be aware of several specific requirements. First of all, your terminal needs to be able to accept PIN debit transactions. That means you’ll need a dedicated PIN pad for your customers to input their PINs. Your PIN pad can be either a separate, stand-alone unit or integrated directly into your terminal.
Once you’ve obtained a suitable terminal and PIN pad, it must be programmed with your merchant account provider’s encryption keys. If you purchase your equipment directly from your merchant account provider, this should already have been done, and your terminal should work right out of the box. However, if you’re switching providers or adding EBT capability to pre-existing equipment, you’ll need to have your terminal(s) re-programmed before you can start accepting payments. Depending on your provider, re-programming usually requires a one-week turnaround time. Note that your merchant account provider will need your seven-digit FNS Account Number to set up your merchant account for EBT payment acceptance. EBT cards issued by the FNS are currently magstripe-only, so you won’t need an EMV-compatible terminal. The FNS announced in 2014 that it intended to introduce EBT cards with EMV chips; however, as of this writing, such cards do not appear to be available.
Most grocery stores and restaurants participating in the SNAP program must buy their own processing equipment or obtain it from their merchant account provider. However, some entities are eligible for free processing equipment provided through the FNS. These entities include:
- Eligible farmers’ markets
- Direct-marketing farmers
- Military commissaries
- Nonprofit food buying cooperatives
- Group living arrangements
- Treatment centers
- Prepared meal services (other than for-profit restaurants participating in state-option restaurant programs)
If you think your business qualifies for free equipment, be sure to contact the FNS directly for more details.
How Much Does EBT Processing Cost?
Because the EBT program is sponsored by the US government and not a private bank or credit card association, the costs for processing EBT transactions are much lower than they are for traditional debit or credit card transactions. In fact, there are no interchange fees or PIN debit fees for EBT transactions. However, your merchant account provider has the right to charge you a reasonable amount for processing these transactions. While some providers allow you to process EBT transactions for free, most will charge a small per-transaction fee. Dharma Merchant Services, for example, charges a flat $0.10 for each EBT transaction.
Not all providers are so enlightened, however. You’ll want to know ahead of signing up how your chosen provider treats EBT transactions. Unfortunately, most providers on the market do not disclose their pricing for EBT transactions on their websites. You’ll have to look in your contract documents or discuss it with your sales representative to get a straight answer. Be especially vigilant if your merchant account uses flat-rate or tiered pricing, as you might be paying the same rates for EBT transactions as you do for regular credit or debit card purchases. This would result in a huge windfall for your provider, as there’s no interchange fee that needs to be passed on with EBT transactions.
You should also be aware that PCI-DSS compliance requirements do not apply to EBT transactions. This won’t make a difference for most merchants who accept both EBT and traditional debit/credit card transactions. However, if you have a merchant account that is set up only to accept EBT payments, you should not be charged any PCI compliance fees.
Finally, it’s important to realize that not all providers offer support for EBT payments. If you’re looking to open a new merchant account or switch providers, this is something you’ll want to clarify before signing up. For example, Square did not support EBT payments until very recently, and even now, it’s through the third-party TotilPay app. Available through the Square App Marketplace, TotilPay allows you to accept EBT payments through your existing Square account and hardware. However, it costs anywhere between $19.95 and $49.95 per month, depending on the features you select.
On the FNS website, you’ll find the SNAP EBT Third Party Processor (TPP) List and Guidance to Retailers, which offers a list of FNS-approved providers that support EBT payments. Although the current list is less than two years old, it’s already somewhat out of date. It’s also not inclusive by any means (for example, it doesn’t include Dharma Merchant Services). However, it has some useful tips for selecting a merchant account provider that supports EBT payments. Pay close attention, however, to the disclaimer regarding third-party processors (TPPs):
FNS has not researched the performance, business practices, reputation or ethics of the companies included on this list, and cannot be held responsible for any unauthorized charges, errors, disputes, misleading information or other problems that result from selection of one of these TPPs. SNAP-authorized retailers need to conduct their own research and due diligence when selecting a TPP and should review the cost of leasing or purchasing equipment and services to make the best choice for their business. The attachment to this document provides some recommendations and guidance to retailers on what issues to consider when selecting a TPP.
In examining the list of vendors provided by the FNS, we note that most of the processors included on the list that we’ve reviewed have received mediocre to below-average overall ratings. Because of this, we highly recommend that you disregard the processors listed with FNS and select one that we’ve reviewed favorably.
The 4 Best EBT Processing Companies
The best merchant services providers for EBT processing are, unsurprisingly, also among the best all-around providers for retail businesses in general. Here are four of our top picks for merchant services providers that support EBT payments:
1. Dharma Merchant Services
Dharma Merchant Services
It’s extremely rare to find a public benefit corporation (B-corp) in the payments industry, but Vancouver, Washington-based Dharma Merchant Services is just that. Unlike so many companies in the processing industry, Dharma actually practices the values it preaches. For merchants, this translates into exceptionally thorough disclosures regarding pricing and contract terms. The company’s advertising and sales practices are among the most transparent and honest we’ve ever seen, and merchants have nothing but good things to say about them.
Dharma offers all its merchants a month-to-month billing agreement, with no long-term commitment. Processing rate plans are all interchange-plus, so you’ll save money on your non-EBT transactions. As for EBT sales, they’re all a flat $0.10 per transaction, regardless of the size of your business or monthly processing volume. As a Fiserv (formerly First Data) reseller, the company offers a full line of Clover products and services, all of which will be preprogrammed to accept EBT payments if you have a SNAP account.
Dharma isn’t the least expensive option out there, but if you process more than $10,000 per month (including both EBT and non-EBT transactions), it will be one of the most cost-effective options you can find. The company also freely admits that its pricing structure isn’t a good fit for smaller businesses. If you process less than $10,000 per month, Dharma recommends Square as a lower-cost alternative. Also, you should be aware that the company does not accept high-risk merchants.
- Outstanding sales transparency and highly ethical business practices
- Month-to-month billing with no early termination fees
- No annual fee or monthly minimum
- Excellent customer service and support
- Not recommended for businesses processing less than $10,000 per month
- Not available to high-risk merchants
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Fattmerchant is one of the few providers in the processing industry to offer membership pricing plans. Also called subscription pricing, this type of plan replaces the usual bewildering variety of monthly and annual fees and charges just a single, predictable monthly subscription fee. For non-EBT transactions, you’ll only pay the interchange costs and a fixed per-transaction fee ($0.06-$0.08, depending on your subscription plan). There is no percentage fee like you’ll find with traditional interchange-plus pricing. While the company doesn’t disclose specific EBT pricing on its website, you shouldn’t have to pay more than $0.08 for each EBT transaction (remember that EBT transactions don’t include interchange fees).
While the savings in processing costs are very attractive, Fattmerchant also exclusively uses a month-to-month billing arrangement with no long-term contracts and no early termination fees. If things don’t work out, you can easily close your account and switch providers. Like many of our other favorite providers, the company also offers high-quality customer support to help keep your business running smoothly.
Alas, no provider is ever perfect. The one potential downside to using Fattmerchant is that its monthly subscriptions are quite expensive for a small business. With subscription plans starting at $99 per month, you’ll want to evaluate your total costs carefully before signing up. Low-volume businesses may find that they’re paying more under this type of plan than they would with a company such as Square. Also, Fattmerchant does not accept high-risk businesses, so if you’re in the high-risk category for any reason, you’ll want to look elsewhere.
- Transparent membership pricing
- Month-to-month billing with no long-term contracts
- No early termination fee
- Not suitable for low-volume businesses
- Not available to high-risk merchants
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3. Host Merchant Services
Host Merchant Services
Host Merchant Services offers one of the easiest ways to get set up with EBT processing that we’ve seen. Simply provide your FNS number, and they’ll add EBT processing to your account. All EBT transactions are processed at a flat rate of $0.10 per transaction. Remember that EBT transactions aren’t subject to interchange fees that have to be paid to the credit card networks. Any costs associated with an EBT transaction are ultimately covered by the government agency sponsoring your customers’ benefits program. There’s no additional monthly fee to add EBT processing, and merchants who process over $20,000 per month (including both EBT and non-EBT sales) will qualify for a free EMV-compliant terminal.
While this feature alone is a great reason to use Host Merchant Services, the company is also a good deal for processing your non-EBT transactions as well. There are no application or account setup fees to get started and no long-term contracts. Billing is on a month-to-month basis, and there’s no early termination fee if you decide to close your account. Processing rates for non-EBT transactions are all interchange-plus, with fully disclosed rates available on the company’s website.
While these features are more than enough to warrant a strong recommendation, we’d note that Host’s interchange-plus rates for non-EBT transactions are not the lowest we’ve seen. The company discloses a standard rate of interchange + 0.25% + $0.10 per transaction for non-EBT retail transactions, but you’ll need to process at least $10,000 per month to get this rate. Rates for lower-volume businesses aren’t disclosed but typically run around interchange + 0.50% + $0.10 per transaction. For some low-volume businesses, this will be more expensive than simply signing up with Square.
- No setup or application fees
- Month-to-month billing with no long-term contracts
- No monthly minimums
- Interchange-plus pricing for non-EBT transactions
- Can be expensive for low-volume merchants
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With predictable flat-rate pricing, affordable processing hardware, and no monthly fees or long-term contracts, payment service provider (PSP) Square has been a wildly popular option for small business owners since its launch in 2009. However, until recently, the company didn’t offer a service to accept EBT payments, preventing many retailers from considering it for their processing needs.
Within the last year, however, Square has established a partnership with TotilPay, a third-party payments processor geared toward accepting EBT payments. As of this writing, features and integrations are still in the development process, so expect that things may have changed by the time you read this article. At the moment, you’ll need to download the TotilPay app from the Square App Marketplace and use it instead of the Square app for processing an EBT sale. However, the transaction will still be routed through your Square account for processing and funds disbursement. Square’s mobile card readers already support TotilPay, but more advanced systems such as the Square Register are not yet compatible.
TotilPay uses membership pricing, and it couldn’t be any simpler. You’ll pay a single membership fee of anywhere from $19.95 to $49.95 per month, depending on the hardware you’re using and any additional options you include. You can also save money by paying your subscription on an annual basis. Best of all, there are no processing charges for EBT transactions. Although the monthly subscription fee might be a little steep for very small or seasonal businesses, we think this is a very promising option for merchants looking to add EBT acceptance to their existing Square account.
- No long-term contracts or early termination fees
- Predictable flat-rate pricing for non-EBT transactions
- No processing charges for EBT transactions
- Works with your existing Square account and card reader(s)
- Account stability issues
- Not available to high-risk merchants
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Is Accepting EBT In My Store The Right Choice?
If you’re in a business that can accept EBT payments under either the SNAP or TANF programs, there’s really no reason not to sign up for an account. Processing costs are minimal, and most businesses can use the equipment they already have to accept this type of payment. Registering as a SNAP merchant does require some paperwork and the willingness to wait a few weeks for approval, but once you’re registered, you should see increased sales from customers who otherwise might not have a viable payment option other than cash. It’s a win-win situation for both you as a merchant and your local community.
If you don’t already have a merchant account, or your provider doesn’t support EBT payments, you might want to consider an EBT-only option. Most merchant services providers that support EBT payments can set you up with a bare-bones merchant account designed to only accept EBT payments. This option can save you a considerable amount of money in processing costs and account fees, as you won’t have to pay interchange fees, PIN debit fees, or PCI compliance fees. Some providers will even offer you a “free” terminal to use for as long as you keep your account open.
As we’ve noted above, there aren’t all that many providers that advertise the availability of EBT support or disclose their prices for EBT transactions. However, the providers we’ve listed above are good all-around choices for both EBT payments and traditional credit/debit cards. For even more great options, see our Merchant Account Comparison Chart.
Our Top-Rated Merchant Services Providers
In Summary: The 4 Best EBT Processing Companies
- Dharma Merchant Services: Best for businesses processing over $10K/month.
- Fattmerchant: Best for high-volume businesses.
- Host Merchant Services: Best for all retail businesses.
- Square: Best for low-volume businesses.