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Choosing a Merchant Service Provider (MSP)

Looking for a payment processor can be kind of like dating. Maybe the relationships you’ve had up until this point have been less than ideal; you know, the kind where you put in all the effort and they somehow got away with all your money. Maybe you're still wondering why it didn't all work out, but in any case, you're back on the market looking for the one. Well, you're in luck! Because all it takes is one good match with the right merchant services provider to change your life, and this article is meant to help you do just that.

We get down to the nitty gritty on what a merchant account really is, why you need one, and supply you with the questions you need to be asking prospective providers. By the end, our hope is that you’ll feel a lot more confident about finding the right match, and ultimately make the best decision for your business. 

What is a Merchant Account?

To start with, it’s important to understand what a merchant account actually is, especially since some merchant service providers offer them and some don't. 

A merchant account is a type of business bank account that allows your business to accept credit and debit card payments. Essentially, the merchant account is founded on an agreement between your business, your bank, and your credit card processor for the settlement of card transactions processed at your place of business. The funds that are received from processing credit and debit cards at your business are first deposited into your merchant account then later funded to your business bank account, usually on a daily or weekly basis.

A merchant account is not an official  bank account and it does not store funds for an extensive period of time. Since a merchant account is an arrangement with a specific processor, merchant accounts cannot transfer funds between payment processors.

Do I Need a Merchant Account? 

Not every payment provider offers its merchants a designated merchant account. For example, with some providers like Square, business owners don’t have an individual merchant ID (MID), but instead share one master merchant account that belongs to their payment processor. Generally speaking, merchant accounts are for more serious, established businesses who require a more comprehensive solution than a provider like Square can provide. 

Whether you want to sign up with a merchant service provider that offers a designated merchant account to your business, or with a provider like Square, will depend on your business needs and personal preferences. There are pros and cons to each option. 

Selecting an MSP that doesn’t offer a full-service merchant account can mean that it’s faster to sign up at the beginning since they don’t generally do any underwriting or credit checks upfront, but there are some drawbacks that come with not having your own merchant account that are worth considering before you decide to go that route (keep reading).

One of these drawbacks is the potential for holds on your funds. When a processor hasn’t done their due diligence by scoping out your business on the front end (at the time you apply) it’s likely that as soon as they see something out of ordinary, they will want to freeze your account to ensure nothing fraudulent is going on. You can be at the mercy of your payment provider  when this happens it may take weeks to receive funds. On the other end, if you have a merchant account, solving an incident like this can usually be accomplished with a simple phone call. They might even proactively reach out to you to confirm the details of a transaction and resolve any concerns before it becomes an issue for your business. 

Payment providers that offer merchants their own merchant account are typically more directly involved with their merchants, and offer dedicated customer support services whenever their merchants need it. Unfortunately when it comes to payment providers who don’t offer merchant accounts, the opposite is usually true, and merchants can have a hard time getting in touch with an actual person to speak about holds on funds.

In short, it may require slightly more information upfront or cost overall to have your own dedicated merchant account, but you’ll benefit from your verified status within the payment processing sphere and a higher touch experience designed to cater to your specific needs.

How Difficult is it to Open a Merchant Account?

Typically, getting your own merchant account can be a bit more of an in-depth process when compared to signing up with a more accessible, “one-size-fits-all” provider like a Square or a Paypal. While these more modern, technology-focused providers are known for their low barrier to entry and simple signup process, there are trade-offs like fund holds, higher processing fees, and disappointing customer support. 

While getting started with a merchant account with the more traditional bank providers (or providers closely associated with banks) can be significantly more rigorous and cumbersome, the advantage is that your approval is predicated on a higher degree of confidence in your legitimacy as a business, resulting in a lower risk of fraudulent activity to the processor. This means you are much less likely to have your funds frozen for suspicion of fraud.

With all that being said, there are rare providers who encompass all the advantages that a modern provider like Square can offer (like no contracts or hidden fees, fast and easy signup process, and a comprehensive technology solution), as well as the advantages that some of the more traditional, established providers can offer (significantly lower rates, great customer service, comprehensive merchant services solution, and your own merchant account). Here’s a hint, you’ve stumbled upon one such unicorn provider by clicking on this very article. We are Helcim, and we represent the best of both worlds. 

Questions You Should Ask Merchant Service Providers

So now you know what a merchant account is and how you can go about getting one. If you’re new to accepting credit cards, it’s important to know what you should be looking for when seeking out a provider that will meet the needs of your business. After all, wouldn’t it be great to get this one decision right so you completely avoid having to suffer through a contentious relationship with your payments provider like so many other businesses have?

If you already have a merchant account, you’re well on your way to having established your business and setting up consistent cash flow, but are you getting the most out of your relationship with your service provider? If you think you might be paying too much in fees, or there are some things about your contract that you don’t understand, you may want to consider switching. The last thing you want though is to switch to another provider that is just as bad or worse than your current one. 

Whether you’re shopping around for the first time or looking for a new MSP relationship, we’ve put together a list of five questions for you to ask prospective merchant service providers:


1) What are the contract terms and conditions? 

Many merchant service providers have lengthy contracts that are difficult or impossible to escape. Ask your current provider how long your contract is, what happens if you want to end the contract early, and what you need to do to cancel the contract when the term is up. (Pro tip: look for a processor who offers a merchant account on a month-to-month basis)

Just because the term is expired, doesn’t always mean your contract is over. Some payment processors may also include auto-renew clauses that business owners should be aware of. Being aware of this clause will keep you from inadvertently being signed up for another term. Ensure you fully understand the terms and conditions of the contract you’re signing to avoid any future frustration and regret.

2) What is the real processing fee? 

When going through the signup process, make sure you clearly understand if you’re getting an “introductory rate” that will increase at some point. Or, ask if there is any kind of rate guarantee that the payment processor can offer. Credit card processing rates will vary depending on the type of transaction, the card used, and the business's monthly processing volume. If the processing rate you’re being offered as a merchant seems lower than what you expected, clarify exactly which transactions or card types the rate does, and does not, apply to.

Be sure to clarify if the processing fee is a flat rate or a percentage of your transaction volume. How a payment processor calculates their fees can make a big difference in what you end up paying monthly. As a general rule, you should try to go with a processor that offers interchange plus pricing, as it’s widely regarded as the most affordable way to accept credit cards.

3) Are there any additional fees or charges that I should be aware of? 

Cancellation fees, early termination fees, PCI Non-Compliance fees, chargeback fees, account change fees, and equipment rentals are all additional costs that you should look out for when it comes to shopping for a merchant account. These are usually charged in addition to your processing fees, and they can add up pretty quickly. Understanding why you’re being charged these fees and how you can avoid them will save your business money in the long term. Try to find a provider who is very clear and upfront about not charging any hidden fees. 

4) If I have a problem how can I get help? 

Each merchant account provider will provide different customer support options and what works best will vary based on a business's preference. Whether you prefer to submit an email, chat online, or pick up the phone and speak to someone, it’s important to know how you can contact your payment processor and when their support team is available. 

If a merchant account provider outsources their customer service, instead of training an in-house team, this may also impact your decision on who is the best fit for you. Having a knowledgeable team that actually works within the walls of your provider can give you peace of mind in knowing that there is a team dedicated to offer support when you need it.  

There aren’t many merchant account providers who invest heavily in merchant support, and many just outsource their support to save money or don’t even have a customer support line. This may not seem like a critical consideration when researching your options, but as any business who has already been accepting credit cards knows, it’s very important to be able to get good help when you need it.  

5) What software or integrations do you offer? 

Specific software integrations can help streamline your business and make you more efficient. For example, if you use QuickBooks, it would be beneficial to ensure your payment processor can integrate with their platform. Whether you’re setting up an online store or managing your inventory, confirm which software your payment processor already offers, and which integrations they support to avoid frustration down the line.

By asking these questions ahead of time you are protecting your business from surprises like unknown fees and inaccessible customer service teams. Not to mention, ensuring your credit card processor offers complimentary software is a great way to prepare your business for growth in the future.

Tools You Need From a Merchant Service Provider in 2021

Luckily with today’s technology, businesses of all sizes are now able to access powerful tools that once were only available to large enterprises with sizable budgets. 

Perhaps while initially starting out, you may have just needed to accept card payments, but as your business grows there are a whole host of options available to you once you sign up for a merchant account that can help you save time and provide your customers with a simple, and expedient payment experience. 

A Point-of-Sale (POS)

Today’s POS systems have come a long way and are often comprised of devices like tablets, computers, or even phones that you may already own. They also include extensive integration options for merchant business activities and added functionality that not only helps your customers checkout faster, but also lets you track your inventory, transactions, sales trends, and customer information. 

If you’re currently accepting payments, but not using a point-of-sale system in conjunction with your terminal or card-reader, then you may be missing out on additional insights and customer trends that could help you make more strategic decisions for your business.

Cloud-based software is the easiest way to go. You simply need to download the software or mobile application onto your tablet or computer, and away you go. 

Virtual Terminal

Most people don’t even know that you can accept payments using just your computer, tablet, or mobile device, without the need for a physical card reader, or even any payment hardware at all. Using a virtual terminal allows you to accept payments from anywhere, even if all you have on you at the time is your smartphone or computer.

Online Payment Pages or an Online Store

Setting up an online store and expanding into the ecommerce space can be a great way to expand your business to reach more customers, even globally. Having access to the tools needed to set up an online payment page and an online store can help you make more sales and reach more customers. 

Today’s online stores are fairly easy to set up and while it may seem daunting before you get started, you might be surprised at how easy it is to list your products online and launch your ecommerce store. And if you already have a website for your business, you can integrate an online store as a shop function or integrate your site with payment pages.

Shopping Carts, Shipping, and Accounting Integrations

Once you have your online store set up and you’re able to accept payments online, you will most likely need a shopping cart and shipping integrations to be able to get the products you’re selling online to your customers. Using integrations like these can be a powerful way to boost your business’s ability to make sales and reach customers.

Custom Invoices With a “Pay Now” Button

While your business may not use invoices every day, having access to invoicing tools is crucial for merchants who want to get paid faster.  Invoices can be an incredibly helpful tool, and ideally, your payment processor will offer them as part of the suite of software you get with them, so that you don't have to find another software or try and reconcile payments between two different systems.

If you're still wondering about invoices though, think about how they can help you collect payment from suppliers and vendors without having to try and catch them on multiple phone calls. With an online invoicing system, customers get the invoice sent directly to their inbox and need only click on “pay now”, plug in their card information, and submit a payment. Even if they're not something you want right now, you might later, so keep your eye out for which MSPs offer this service.

Recurring Payments and Subscription Management

If you’re a merchant whose business activities involve offering any sort of subscription services, you may want to find a payment processor who offers recurring billing or a self-service customer portal. Using these tools can help you automate your payments over set time intervals and also have your subscriptions renew automatically for added convenience.  If a customer needs to update their payment information, they can update their card details themselves through the self-serve customer portal. These tools are especially helpful for any businesses that offer (or would like to offer) monthly memberships, regular classes, or regular donations.

Which Merchant Account Provider is the Best?

Setting up a merchant account with a credit card processor is a major step in taking your business from the bedroom to the big-time, but it’s important to understand what you’re getting from your provider in return for paying for their service. Every business will have different needs, so make sure you ask the right questions, understand any contracts or fee structures, and have all the tools you need to service your customers effectively.

Final Thoughts

We know choosing a payments provider can be a difficult process, but understanding what options are available to you and how each provider differs can keep you from falling in with the wrong processor. We hope this guide was helpful and that you can find the merchant service provider you’ve been searching for!

Danny Randell

Danny Randell holds a Bachelor of Arts degree with a major in history and a minor in business administration and started his career with ATB Financial. Whilst at ATB, he worked first in corporate recruitment and then on the front lines of banking. Just prior to joining Helcim, Danny worked as an advisor at Sun Life Financial where he achieved LLQP and CIFC certifications. Danny is a passionate writer and has contributed to the Western Talent & Innovation Review; a journal for which he was also an editor, and helped found the Ambrosia Literary Review at his alma mater. When the opportunity to write for a living came his way, he couldn’t help but jump at the chance to join Helcim. Besides being an advocate for small business, Danny loves history and music, and when he isn’t writing for Helcim, he is probably writing songs or blogging about the past.