If you want to accept credit and debit card payments for your business, you’ll need a merchant account. A merchant account is essentially a line of credit that enables the processing of transactions and the deposit of funds into your business’s bank account.While it’s a required component of collecting credit card payments, not all merchant accounts are created equal. There are different types of providers who can offer your business a merchant account, with various rate-plan options, and different levels of technology and support. Making the wrong choice could lead to losing money to unethical billing practices, deprecated technology and harmful contract terms.

To help you make an educated decision about which provider to choose, we’ve compiled a list of five factors that will help you navigate the complex payment landscape and establish your business with a trusted and ethical provider. Often, your business’s maturity and expected processing volume will guide your merchant account decision.


Payment Facilitators vs. Merchant Account Providers

An effective way to first narrow down your research is to determine whether you should partner with a payment facilitator or merchant account provider. The maturity of your business is a major factor in making this decision.

Payment facilitators offer a shared merchant account to anyone who wants to sign up with them. The barrier to entry is low and setup times are fast. However, because merchants aren’t properly underwritten before receiving an account, funds may be held to cover a higher assumed risk.

In contrast, merchant account providers furnish all of their customers with their own merchant accounts. Generally, merchants must be underwritten to do this. Businesses are often asked to share existing merchant statements, bank statements and financials. Because these items often aren’t available for newer businesses, young companies tend to pick a payment facilitator for ease of access. By choosing a merchant account provider, businesses can benefit from additional rate plan options that may be better suited to their business size and processing volume.

As a last note: Some merchant account providers offer all-in-one solutions by also operating as payment gateways. This helps streamline your e-commerce billing. With one provider, it’s easier to understand your effective processing rate and connect with support.


Rate Plans Offered

Traditionally, payment facilitators tend to offer their customers flat-rate pricing. Such rate plans are straightforward, but not cost-effective for high-processing businesses. Regardless of credit card risk and reward levels — which traditionally define processing rates — you pay the same rate for every transaction with flat-rate pricing. While you’ll know exactly what your processing rate is for everything, you’ll pay more for low- and medium-cost transactions because flat pricing comes with a high rate for every transaction to account for all possible risk and reward levels.

In contrast, merchant account providers tend to offer interchange-plus pricing, which charges customers less for lower-cost transactions, resulting in more cost-effective processing. Ultimately, small businesses that lack the documentation and maturity to undergo merchant underwriting usually don’t process much volume at the beginning, lessening the impact of expensive rates. That said, medium- to large-size businesses processing $10,000 or more each month should partner with a provider that offers more affordable rate plans to spare precious profits.


Available Technology

As we all know, technology is evolving at an exponential pace. It doesn’t make financial or business sense to procure already-outdated technology. Some providers still don’t offer EMV-ready devices, meaning that customers who switch to them will either assume unnecessary chargeback risk by swiping chip cards, or have to switch providers again to implement the newest and greatest fraud-prevention technology.

While some providers claim they have EMV terminals, they often lack the certification required to make use of the chip-card slot. Because of the liability shift of 2015, merchants now assume all risk for fraudulent transactions resulting from a swiped chip card. If you run a high-volume business, you especially can’t assume that level of undue risk.

EMV isn’t all: Numerous studies point to the rise of mobile-payment adoption, making NFC technology a future-ready payment feature. NFC technology enables contactless payments from smartphones and smartwatches. Furthermore, some providers now help businesses go entirely paperless with their receipts. They do this by digitally storing all transaction information in the cloud in what is known as a virtual terminal. By going paperless, your business can reduce its environmental footprint and save precious time and money used to store paper receipt copies.

If you do go with a provider that can store customer payment and transaction histories, make sure to select one that tokenizes all cardholder data to protect your customers from the risk of a data breach.


Ethical Billing

This is, admittedly, a trickier aspect to research, but the payments space is rife with unethical billing practices. Merchant statements are confusing, with no consistent labeling of fees and no transparent calculations showing the math behind each fee. Here is a brief list of ways providers can inflate your bill to bolster their profits:


  • Hidden volume fees
  • Inflated AVS fees
  • Padded dues and assessments
  • Non-qualified interchange fees
  • EMV non-compliance fees
  • PCI non-validation fees
  • Tax reporting fees
  • Bank service fees
  • Inflated Amex fees
  • Hidden refund fees
  • Billback and enhanced billback rate plans
  • Excessive downgrades


With a little know-how, some of these unethical billing tactics are simple enough to spot. Others require a professional eye that can quickly assess how different fees were calculated and what the true interchange rates of each card type should be. Additionally, some providers pack unsavory contract terms into their initial agreements that trap merchants into expensive terminal leases and auto-renewing contracts that make it painful to switch.

To identify unethical billing practices, look at your current merchant statements and contact your provider with any questions you may have. If the support representative you speak with isn’t able to give you a straight answer to your questions, take it as a good first sign that you might be unfairly charged. Next, we recommend getting a no-cost, no-obligation evaluation of your statements from a risk analyst.


Quality Support

Another downside of payment facilitators is the lack of support they provide. Oftentimes, these providers offer email-based support, but it’s not always U.S.-based and they may not offer a telephone option. When it comes to your funds (and those of your customers), having a provider that can troubleshoot any technical questions you have is critical.

Everything from credit card rejections to equipment malfunctions can create payment friction, jeopardizing your relationship with repeat customers. Do your business a favor and elect to partner with a provider that offers U.S.-based telephone, email and chat support.


About Christina Lavingia

Christina Lavingia is the marketing manager at PayJunction, an all-in-one merchant account provider and payment gateway. PayJunction is an integrated partner with 3dcart, offering EMV-ready Smart Terminals, U.S.-based support and transparent, ethical billing. Request a no-obligation statement analysis to identify any unethical billing practices in your current merchant statements.


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