Merchant accounts: Overview, benefits, and cost.

Have you ever been asked by a customer, "Do you accept credit cards?" and found yourself standing there paralyzed because you can't? This frustrating situation could cost your growing business a sale.

Let's change that with this article.

We’ll explain why a merchant account is crucial for your business, covering what it is, how it enables you to accept credit cards, and how it can help you grow across multiple sales channels. By the end, you’ll be ready to confidently say, "Yes, we do accept credit cards!"

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What is a merchant account?

A merchant account is a type of bank account that allows businesses to accept payments via credit, debit cards, or even ACH payments. It acts as a middleman between your business and the customer's bank. 

Imagine you run a small bakery. When a customer swipes their card to pay for a cupcake, the payment first goes into your merchant account. The merchant account is a holding area where the payment is processed. During this time, the transaction is verified, the funds for the cupcake are collected from the customer’s bank, and any necessary fees are deducted.

At the end of the day, all the funds from your daily transactions are grouped together and transferred to your business bank account within a few business days. The merchant account ensures that the transaction is secure and that you receive the correct payment for your cupcake sale.

A merchant account makes it easy to accept card payments, giving your customers more ways to pay, and ensuring those payments are processed securely.

Why do I need a merchant account?

You need a merchant account when you can accept credit and debit card payments from your customers. But here's the good news: you don't have to handle it all by yourself.

A payment processor like Helcim, who takes care of the transactions behind the scenes, will help you set up the account. This account is what you’ll use to work with them and start accepting credit and debit cards.

The payment processor takes care of several essential tasks for you:

• Register your business with various card networks so you can accept all the different types of payments.
• Make sure the processed funds land in your bank account within a few business days.
• Provide all the necessary hardware and software you need to start accepting payments
• Provide customer support, if you run into any issues or have questions.

If you are a seller on online marketplaces like Etsy, Amazon, or eBay, you likely won’t need to open a separate merchant account because these platforms have their own integrated payment processing systems. They handle all the payment transactions for you, allowing you to focus on selling your products without worrying about setting up and managing a merchant account.

What are different types of merchant accounts?

Merchant accounts come in various types to suit different business needs. Here’s a rundown of the main types:

• Retail Merchant Account: Ideal for physical stores where most transactions happen in person. For example, Clothing boutiques, grocery stores, or coffee shops. Retail merchant accounts have the lowest processing fees since the risk of fraud is lower when the card is physically present.

• Internet Merchant Account: Designed for online businesses. This account allows you to accept payments through your website or app. Since the card isn’t physically present, the processing fees might be a bit higher than retail merchant accounts due to the increased risk of fraud.

• Mobile Merchant Account: Perfect for businesses on the go, like food trucks, market vendors, or service providers who travel to customers. With a mobile card reader and your device, you can accept payments anywhere.

• MOTO (Mail Order/Telephone Order) Merchant Account: This type of account is for businesses that accept orders via mail or phone. It allows you to enter customer payment details on a web-based POS and accept payments. Examples include catalog sales companies, ticket booking agencies, and charity donation centers.

• High-Risk Merchant Account: Some businesses are considered high-risk due to the industry they’re in, such as crowdfunding, tobacco, or medical and drugs. The risk level can also be influenced by the volume of credit card transactions being processed. High monthly volumes or large amounts per transaction are often seen as riskier by payment processors.

Don’t let the variety of merchant accounts confuse you. A payment processor like Helcim will help you set up one merchant account to meet all your needs. Whether you want to sell in person or online, one account is all you need to grow your business.

How much does a merchant account cost?

Understanding the costs of a merchant account can feel a bit like navigating through a maze, but it’s important to know what you're getting into.

1. Setup fees

Some payment processors charge a one-time setup fee to establish your merchant account. This can range from $50 to $200, though many merchant account providers waive this fee to attract new customers.

2. Monthly fees

Many merchant account providers charge a monthly fee ranging from $15 to $250, depending on your business needs and required tools. For example, a restaurant might pay more due to the need for specialized hardware and software, which justifies a higher fee to cover these extras.

3. Credit and debit card processing fees

The processing fees are the fees you pay each time a customer pays for a purchase.

With credit cards making up 32.6% of consumers’ monthly purchases, understanding your credit card processing costs is crucial to keeping more of your hard-earned money in your pocket. Below is a credit card processing fee comparison between common processors:

Top processors with the lowest processing fees for Canadian businesses:

Processor	Online fees	In-person fees
Helcim	2.39% (avg) + $0.25	1.76% (avg) + $0.08
Moneris	2.85% + $0.30	2.65% + $0.10
Square	2.90% + $0.30	2.65%
Stripe	2.90% + $0.30	2.90% + $0.30
Clover	3.50% + $0.10	2.30% + $0.10

Top processors with the lowest processing fees for U.S. businesses:

Processor	Online fees	In-person fees
Helcim	2.49% (avg) + $0.25	1.93% (avg) + $0.08
Moneris	2.85% + $0.30	2.65% + $0.10
Square	2.90% + $0.30	2.60%
Stripe	2.90% + $0.30	2.90% + $0.30
Clover	3.50% + $0.10	2.30% + $0.10

Why is Helcim’s fee average? The credit card processing fees are made of two primary components:

• Interchange fees: These are fees set by credit card networks like Visa or Mastercard and are paid to the cardholder’s bank. These fees vary based on factors such as the type of card, transaction method, and industry.
• Processor margin: This is the additional fee that payment processors charge on top of the interchange fees.

In theory, the fees you pay fluctuate every transaction. To simplify, most processors offer a flat (fixed) rate, which makes the cost predictable but often includes a higher margin to ensure their profit.

In contrast, Helcim uses an Interchange-plus pricing model, which passes the true cost of each transaction to you. This approach allows you to keep more profit to grow your business.

Debit card processing fees are structured similarly to credit card fees, so if you secure lower rates for credit card processing, you'll also benefit from lower fees for debit card transactions.

4. ACH processing fees

Some merchant account providers, like Helcim, also offer ACH payment for their merchants. ACH payments allow you to collect funds directly from your customer’s bank account, often at much lower fees than credit or debit card transactions.

Processor	ACH fees	Fee is capped at
Helcim	0.5% + $0.25	$6
Square	1%	N/A
Stripe	0.8%	$5

5. Credit card chargeback fees

If a customer disputes a charge and requests a credit card chargeback, you might be charged a fee ranging from $20 to $50 per chargeback.

According to Mastercard, merchants are expected to face over $100 billion in chargebacks in 2024. This staggering figure underscores the significant impact chargebacks can have on a merchant’s profitability.

A chargeback happens when a customer asks their bank to reverse the charge. This can occur because of unrecognized charges, dissatisfaction with products or services, fraudulent transactions, or friendly fraud.

Helcim offers tools for submitting evidence to counter chargebacks and protect your business. If the dispute is resolved in your favor, Helcim will even refund the chargeback fee.

6. PCI compliance fees

PCI compliance is a set of rules to protect cardholder data, required by major brands like Visa and Mastercard. Most payment processors guide you through an annual self-assessment (SAQ) to obtain PCI certification.

Helcim doesn’t charge for PCI certification, while some processors may charge hundreds to thousands per year to help you stay compliant.

7. Contract termination fees

Many merchant account providers require long-term contracts, usually three to five years. Ending your contract early can result in hefty cancellation fees, ranging from $250 to $5,000 or more. If you lease equipment, you might also face high buyout costs. It’s essential to understand your contract terms to avoid surprises.

Learn more about canceling contracts in our guide for Canadian and US businesses.

8. Other hidden fees

Beyond the obvious fees, there are often hidden charges to watch out for.

• Non-qualified discount fees: Many processors advertise low "qualified" rates but add non-qualified fees that can significantly increase costs.
• Monthly minimums: If your transaction fees don’t meet a certain threshold, you could be charged the difference, which is risky during slower periods.
• Statement and admin fees: Additional fees for statements or administrative services can add up, and some processors may not disclose these until after you’ve signed up.

What information do I need to apply for a merchant account?

Applying for a merchant account might seem daunting, but it’s pretty straightforward once you know what you need.

Business Information: You’ll need to provide some basic details about your business, like:

• Company name
• Company tax ID or employer identification number (EIN)
• Contact information

Additional business information: Some merchant account providers might ask for extra details to better understand your business:

• Your industry and business structure
• The estimated monthly processing volume and processing history
• The products or services you offer
• The payment methods you intend to accept
• Whether you'll be processing transactions in person, online, or both

Personal Information: This information is used to ensure that the business owner's identity is verified and valid:

• Your name and contact information
• Social Security Number (SSN) or equivalent identification number
• A government-issued ID (like a driver’s license or passport)

Payment processors may ask for additional information to ensure that the business and its owners can financially support any chargebacks or refunds that might occur.

Open your merchant account with Helcim

While some providers require sales agents and tons of paperwork to get you through the door, getting started with a merchant account at Helcim is straightforward and hassle-free. Simply complete the sign-up which takes as little as 5 minutes. No paperwork is required.

Once your application is approved, Helcim will guide you through setting up your account, including providing any necessary hardware and software.

Why choose Helcim?

• Save on processing fees: Enjoy savings of up to 24% on credit card processing fees compared to other merchant account providers.
• All-in-one account: One merchant account for all your in-person and online payment needs.
• Comprehensive tools: Free access to all the tools you need to accept payments and run your business, whether in-person or online.
• No hidden costs: No monthly fees, no contracts, no hidden fees – you only pay for what you process.

If you’re currently with another provider, Helcim’s Merchant Buyout Program will waive up to $500 in processing fees to cover your early termination fees or equipment leases. We also provide step-by-step support to help you migrate your data to Helcim.

Start your journey with Helcim today and experience seamless, cost-effective payment processing.

Break up with bad rates.

Feeling stuck with your provider? We'll waive $500 of your processing fees when you switch to Helcim.

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FAQ

What is the difference between a merchant account and a business account?

A business account is like your business's everyday checking account where you manage all your finances—receiving payments, paying bills, and handling payroll. A merchant account is specifically for accepting credit and debit card payments. Think of it as a middleman that ensures the money from the customer's bank gets deposited into your business account.

Do I need a merchant account to accept credit cards?

Yes, you need a merchant account to accept credit card payments. A merchant account allows you to process card transactions and ensure the funds are securely transferred to your business account. Without a merchant account, you won't be able to accept credit or debit card payments directly from your customers.

Can I cancel a merchant account?

Yes, you can cancel a merchant account. If you are in a contract, it's important to review the terms first. Some providers may have early termination fees or other penalties if you cancel before the end of your contract period. Learn more about how to get out of a contract through our guide for Canadian businesses and US businesses.

Do banks offer merchant accounts?

Yes, many banks offer merchant accounts as part of their business banking solutions, often in partnership with payment processors. The disadvantage of opening a merchant account with a bank is that they can sometimes have higher fees, more paperwork, and less flexible terms compared to specialized payment processors. Additionally, banks might have longer approval times and more stringent application requirements.

What are high-risk merchant accounts?

High-risk merchant accounts are specialized accounts for businesses that operate in industries with a higher risk of chargebacks, fraud, or financial instability. For example, crowdfunding, tobacco, or medical and drugs. The risk level can also be influenced by the volume of credit card transactions being processed. High monthly volumes or large amounts per transaction are often seen as riskier by payment processors.

How hard is it to get a merchant account?

Getting a merchant account is generally straightforward. You'll need to provide some basic business and personal information, financial details, and possibly your processing history. Most applications can be completed online in about 5 minutes, and approval times can vary. Helcim often review your application and get back to you within less than 24 hours.