How to Accept Credit Card Payments without a Merchant Account

Contrary to popular belief, you can accept credit payments without a merchant account. There are tons of businesses who operate in the absence of a merchant account and do just fine. The important thing to understand is what your options are and why it would be advantageous to do this.

When considering your business model, the goods or services you will provide, and who your consumers will be, you should also decide how you will accept payments. Some business models cannot survive without a merchant account, while others don’t find it to be a necessity. The question is, can YOUR business operate without one?

What is a Merchant Account?

A merchant account is a financial service that provides credit card processing, debit card and other electronic payment options to businesses. It is typically offered by a lender or a bank and tied contractually to the actual processors such as Visa, MasterCard, etc. This type of bank account is designed specifically for businesses and has a variety of fees associated with it.

Merchant accounts are typically setup with a detailed agreement regarding things such as:

  • Per-transaction fees from the bank
  • Per-transaction fees from the credit card companies
  • The details of the bank’s card processing network
  • Any monthly or annual fees charged by the bank for various administrative services

Savvy merchants will shop several companies before choosing a merchant account.

Types of Payment Solutions Available

If you think you can accept payments without having a merchant account, you’re right! There are tons of solutions on the market that will allow customers to pay you for products and services without swiping their card through a terminal. These are increasingly popular forms of payment for many consumers and merchants are smart to accept them.


This type of payment is a virtual wallet that consumers can use to make online purchases. It is essentially a place where people deposit money into their virtual wallet and then use it as a way to pay for things online. PayPal is a great example of this type of payment option.

Payment Cards

Payment cards are similar to virtual wallets in that a customer can load a balance onto the card and use it to make purchases. They are basically pre-paid debit cards that can be used in the same way, but do not have overdraft or other such features. They also do not accrue interest in the way that credit cards do. You simply use them until the balance is gone, or reload them when they get low.

Digital Currency

This type of money is only accessible on computers or mobile phones. It exists only in digital form, but can be used to make purchases much like physical money. They require that the purchaser and the merchant both be connected by the same network. This allows the money to change hands directly between the merchant and the consumer without the need for payment processors.


Automated clearing house (ACH) is a network that facilitates electronic funds transfers between accounts. It can move money from one bank to another and one account to another without the need for cash, checks, wire transfers or other means.

Accepting Payments Through a Third Party Processor

Third-party processing is an alternative option to having a traditional merchant account. In this scenario, you can accept credit card payments, but you don’t have a merchant account that’s dedicated to your business. That is the key difference between the two.

Instead, the payments go into your third-party processor’s account. Some of the most popular third-party processors include PayPal, Stripe and Square. They assess fees and then deposit the appropriate amount of money into your bank account. There are various pros and cons to working with a third-party processor instead of having a traditional merchant account.

Here are some key considerations regarding third party processors vs merchant accounts.

Ease of Registration

Most traditional merchant accounts require credit checks and have to abide by the bank’s underwriting policies. This often means application fees and extended amounts of time in process before being granted an account. The reason for having such a process is to assess the level of risk that the merchant poses to the lender and determine whether or not it’s worth the risk of granting them an account.

Conversely, a third party processor will usually have a setup process that is faster and easier. Since they only have one merchant account to deal with, and tons of merchants to fund it, their risk is much lower than that of traditional banks. This allows a third party processor to take on more merchants and still maintain a lower risk profile.

All-Inclusive Solutions

Unlike most banks, the majority of third party processors will offer their clients a host of services, bundled together into a succinct business solution. For example, you will probably be able to get all of the following in one bundle from a third party processor:

  • Point of sale processing
  • Invoicing functions
  • Virtual terminals

These are just a few of the options you will have with most third party processors. The vast majority of banks do not have the ability to offer all of these solutions, so merchants have to find them from separate vendors.

Fee Structure

It’s no secret that banks are notorious for having tons of fees associated with their services. Many merchants just assume that these credit card processing fees are a cost of doing business. However, steering clear of traditional merchant accounts and opting for a third party processor can often save businesses a ton of money in fees alone.

Most third party processors have a very straightforward fee structure that is significantly lower than that of a merchant account through a bank. Moreover, these fees are generally more transparent to the merchant and easy to explain and understand.

Third party processors typically charge a flat, per-transaction fee that is based on the type of payment method being used. They usually don’t have setup fees, application fees, monthly or annual fees, either. This makes the contractual side of the agreement simple and transparent, which many small business owners appreciate.


Some businesses function really well without traditional merchant accounts and save themselves a lot of fees as a result. Doing your research and learning about all the options available to you could prove to be great for your bottom line. Only you will know what’s the best choice for your business.

Cris Carillo is the co-founder of Allied Payments.  Allied Payments provides online payment processing services, specializing in medium to high risk merchant account solutions.

Categories: Credit Cards

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February 15, 2021 How to Accept Credit Card Payments without a Merchant Account