The Small Business Guide To Accepting SNAP/EBT Payments
EBT (Electronic Benefit Transfer) is a payment system designed to allow recipients of 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 make needed purchases of food and goods. EBT replaces the old “food stamps” program, allowing recipients to use a convenient and secure magstripe card that’s very similar to a PIN debit card to make their purchases.
For merchants, being able to accept 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’s 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 who offer support for EBT payments at a fair and reasonable cost.
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Regulatory Requirements For Accepting EBT Payments
Like any government-sponsored program, you’ll have to wade through a fair amount of bureaucracy before you’ll be able to 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 SNAP program is administered by the US Department of Agriculture’s Food and Nutrition Service (FNS), so the first thing you need to do is to obtain a permit (usually called either a SNAP permit or an FNS permit) from them. 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 submit an application 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; and
- Your merchant account provider’s information (including name, phone number, address, and website)
This information can be uploaded online, or you can print it out and mail it 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 any 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.)
There are also numerous special rules that 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.
Hardware Requirements For Accepting EBT Payments
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. This means that 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 it can be 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.
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 that’s provided through the FNS. These entities include:
- Eligible farmers’ markets
- Direct-marketing farmers
- Military commissaries
- Non-profit 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.
Processing Costs For EBT Payments
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 a few rare providers might allow you to process EBT transactions for free, most will charge a small per-transaction fee. Dharma Merchant Services (see our review), 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, so 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. Obviously, 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 obviously something you’ll want to clarify before signing up. For example, Square (see our review) does not currently support EBT payments. While they disclose this fact on their website, it’s easy to miss.
Top-Rated EBT Providers
It should come as no surprise that the best EBT providers are also among the highest-rated merchant services providers in general. If you’re looking for information 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 who support EBT payments. This list is not inclusive by any means (for example, it doesn’t include Dharma Merchant Services (see our review)). This document also includes some useful tips to help in selecting a merchant account provider who supports EBT payments. Pay close attention, however, to their 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. Here are some of our top picks for merchant services providers who support EBT payments:
- Dharma Merchant Services (see our review): As noted above, Dharma charges a flat $0.10 per EBT transaction with no additional fees. They can also sell you a terminal that’s preprogrammed to accept EBT payments if you have a SNAP account.
- Fattmerchant (see our review): Fattmerchant doesn’t disclose specific EBT pricing, but at only $0.08 per transaction and no percentage markup for their standard pricing plan, you can expect considerable savings over competing providers.
- Host Merchant Services (see our review): It doesn’t get any better than free, does it? That’s right – Host Merchant Services doesn’t charge any additional fee for EBT transactions. While you might expect to pay a little more for things like monthly account fees, this is certainly a great low-cost option for any business that handles a lot of EBT transactions.
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 who support EBT payments can set you up with a bare-bones merchant account that’s 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.
If you’re using a provider like Square (see our review) that doesn’t support EBT payments, an EBT-only merchant account can expand your customers’ payment options. Simply use Square for your traditional debit and credit card purchases, and your EBT-only account for authorized EBT transactions. Since Square doesn’t charge monthly or annual account fees, this is a great low-cost option to cover all your bases when it comes to payment method acceptance.
As we’ve noted above, there aren’t all that many providers who 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 choices, see our Merchant Account Comparison Chart.
Our Top-Rated Merchant Services Providers
Our Top Picks For Credit Card Processing