How to Accept Credit Card Payments Without a Merchant Account

November 19, 2021

How to Accept Credit CardWithout a Merchant Account

If you are a new business owner, one powerful way to maximize sales in your first year of business and each year moving forward is by accepting credit card payments. Luckily, it's easier than ever to do so, and today's payment technologies fulfill credit card payments for brick-and-mortar businesses, online businesses, and mobile businesses. You choose the method that works best for your business type.

You may be under the impression that you are required to have a merchant account for all credit card sales, debit card transactions, and other electronic money transfers. Unfortunately, setting up this account through your bank can be time-consuming, laborious, and even expensive. Add in the issue of lengthy contracts, and you may be searching for another solution. This article introduces you to another solution—third-party payment providers.

How to Accept Credit Card Payments without a Merchant Account

You'll need to partner with a payment service provider, also known as a third-party payment provider, payment facilitator, or processing aggregator, to take credit card payments without a merchant account

A third-party payment provider provides the merchant account and grants you access to send and receive payments.  

Knowing the best ways to use a third-party provider means understanding how this type of account is different from a bank merchant account. Let's review each in detail. 

What is a Merchant Account, and Why is it Needed?  

Can I accept credit card payments without a merchant account? 

A merchant account is a bank account that sends and receives payments between bank institutions offering credit cards. It is separate from your business bank account. When you run a customer's credit card, the funds arrive in your merchant account and then transfer to your business bank account.

Examples of Merchant Account Providers 

Examples of merchant account providers include your local bank, a third-party payment provider, or an e-commerce platform. In the case of a bank-based merchant account, you open the account yourself. On the other hand, a third-party payment provider works as a payment aggregator and has its own merchant account for moving funds to and from your business bank account. The third-party processor is in charge of the merchant account.  

What is a Third-Party Payment Provider?

A third-party payment provider offers multiple services. They can act as your:

  • Merchant account provider by working as an alternative to a bank merchant account and handling all fund movements.
  • Payment processor by connecting your merchant bank account to credit card networks.
  • Service provider by offering hardware and software solutions to fulfill credit card transactions. Examples include terminals and online payment software.

Let's take a closer look at how the process works between these companies when you run a credit card transaction.

Credit Card Payment Processing Through a Third-Party Payment Processing Provider

A third-party payment processor communicates all online payments requests from your merchant account through the corresponding credit card network (VISA, Mastercard, or American Express) to the appropriate banking institutions shown on each customer card. Once the bank confirms the active consumer account is in good standing, its forward approvals or denials for credit card payments, allowing funds to move to your merchant account.

This function has made payment processing providers integral for most payment processes regardless of the type of merchant account. Even bank merchant accounts use them.

Accepting Credit Cards Without a Merchant Account Using Third-Party Payment Processors

When using a third-party payment processor as your merchant account, the processor controls the account which holds the funds and then deposits them into your business bank account.  

How to Accept Payment  

Online Payments Through a Website 

Do I need a merchant account to sell online? 

If you are an online-only business or offer online buying in your lineup of offerings, you will need a merchant account.

A third-party provider can provide you with a virtual terminal for online payment on your website. Often this software is easy to set up, and the provider may also assist with set up. To do this, you will need a payment gateway for increased protection against fraud, and the provider can also offer a gateway. 

Some e-commerce platforms also have merchant accounts attached, but you will need another merchant account if you take payments in other ways, such as through your website, in-store, or over the phone.   

Alternative Payment Methods

POS Hardware: The same third-party provider can sell or lease point-of-service hardware, and the equipment is better than ever. Devices now go beyond a simple cash register. You can take in-person payments using compact hardware offerings such as credit card reader hardware, affordable chip card readers, and e-wallet readers for mobile devices, such as smartphones and portable payment terminals in your store. POS hardware may also include portable printers and scanners.

POS Software: This software powers your POS hardware for all mobile, online, and in-person transactions, but you also enjoy powerful features beyond credit card capability. Providers offer software that helps you manage your business, such as inventory management, employee management, loyalty cards, gift payment cards, sales data reading capability.

Benefits of Third-Party Credit Card Processing Providers for Merchants  

Simplified Underwriting 

Acceptance into a third-party merchant account is fast and easy, and approvals are often quick, within the same day or even in a few hours. Approval from a bank-based merchant account provider, however, can take a few business days.

How does the acceptance happen so quickly? There is a no-risk assessment by the provider, which benefits you if you are a higher-risk business. To reduce the risk and create a more solid business foundation, these providers terminate contracts with customers more quickly if they deem them as risks.

Lower Average Credit Card Network Processing Fees

Merchant accounts through banks typically limit credit card processing fees to interchange-plus pricing. In this pricing model, additional charges per transaction are a percentage of each transaction amount plus a flat fee per order and other charges.

You can still opt for interchange-plus pricing through a third-party processor or select other options. One popular option is flat rate charges. A flat rate is often the lowest rate for low-volume merchants selling less than $10,000 worth of orders per month.

A flat-rate fee plan also makes monthly billing much easier—especially when you are just starting your new business. Keep in mind, as your business grows, a third-party provider can result in less favorable rates. If your average business volume exceeds $10,000 a month, you may want to consider a bank merchant account.

No Added Charges for Credit Card Processing 

A third-party provider only charges per transaction, but a bank merchant account often has added fees for credit card services, such as a monthly or annual fee, gateway fees, and PCI compliance fees.

In exchange for only charging per transaction, the third-party provider usually charges higher rates.

Additional Protections

A third-party provider will keep an eye on account activity to reduce risk. For example, they may hold a transaction if it is much larger than usual. 

Added Front-end and Back-end Benefits

third-party provider may offer software. In contrast, a merchant account through a bank typically enlists the help of a third-party provider for those benefits, with a mark-up in cost.  

Month-to-Month Contracts

Most third-party payment processing contracts run month-to-month, whereas bank-based merchant account terms often require multiple years in one contract. A bad choice of a provider can lead to years of frustration or painful cancellation fees, but a month-to-month service makes it easy to choose another provider as needed.

Shorter terms also benefit the provider, allowing them to cancel contracts if risks are too significant.

Consolidated Providers

If you use a traditional merchant account, you may still need a credit card processor; having one that does both allows for improved issue resolution.

Easier Access to Multiple Credit Card Networks

When you have a merchant account through a bank, you will need to undergo separate setups for the type of credit cards you plan to accept (VISA, Mastercard, etc.) Using a third-party provider as an alternative to merchant accounts makes getting multiple networks in one step easier. 

Benefits of Bank Merchant Accounts

Though third-party processors have benefits, there are also benefits to being a merchant account holder through a bank in certain circumstances. 

You Can Use Your Same Bank as Your Business Account

Having both accounts in one location helps speed up enrollment since they already know your business. 

More Profit

If you run more than $10,000 per month, you can save more with a merchant account. 

More Options

You aren't locked into using one specific payment processor that comes with the merchant account. 

Less Risk of Account Closures

With a more extended contract and more robust risk analysis at the onset, you have less risk of your account being closed due to an abnormal occurrence. 

Improved Customer Service

already have a strong relationship. Your bank knows your business and may even know you personally, providing service to meet your needs. However, some third-party providers are also known for customer service. 

Third-Party Payment Processors versus Merchant Accounts: A Summary 

Choose a third-party payment processor for benefits like quick setup, shorter contracts, flat fees for better business decisions, and added merchant services, such as an online payment gateway, PCI compliance, and faster setup of multiple credit card networks. Having all merchant services under one roof may make your life easier when starting a new business.

Alternatively, a bank merchant account may be a better choice, despite added work. Keep in mind a merchant account offers a lower cost per transaction and but more extended contract periods. Unless your bank offers that service, you will likely also need a payment processor to communicate with the credit card network.

How To Start Accepting Credit Cards Without a Merchant Account 

There are several third-party provider options you may consider for your business. BNG Payments offers competitive rates and exceptional customer service  

Be sure to shop around because each provider offers its own rates and benefits. At BNG Payments, we offer competitive rates and a full suite of benefits, such as:  

  • credit card processing 
  • payment gateway 
  • mobile processing 
  • online payments 
  • PCI compliance 
  • EMV processing 

Connect with BNG Payments and see how we can help your business 





(C) 2024 BNG Technologies. All rights reserved.