What are you actually buying when you sign up for merchant services?
Summary
You are buying a bundle, and the contents change from one seller to the next. Merchant services can include payment processing, a merchant account, an online gateway, terminals or POS software, deposits, and dispute handling, but each provider decides which of those pieces sit in one contract and how each is billed. The label tells you almost nothing about price until you split the offer into its parts.
A bank and a fintech package the same jobs differently
Square sorts merchant services providers into three groups: banks, independent sales organizations (ISOs), and fintech companies like Square itself. Chase and Square show how far apart the first and last groups can be.
A bank. Chase sells merchant services to its business banking customers, and the fine print on its fee page says the services are provided by Paymentech, LLC or other subsidiaries of JPMorgan Chase Bank, N.A. The bank account is part of the product: deposits reach a Chase business account the same day or next business day, while another bank's account waits two to three business days.
A fintech. Square tells sellers that not every provider requires a merchant account, and that a dedicated bank account is all you need to take payments with Square. The merchant account still exists as a function. It is folded into the service instead of sold to you as a separate account.
The pieces a bundle can hold
- Processing sends each sale to the card issuer and on to settlement. Chase charges 2.6% + 10¢ for an in-person card.
- A merchant account holds card proceeds before they reach your bank. Square does without a separate one. Authorize.Net's All-in-one plan includes one for $25 a month plus 2.9% + 30¢ per transaction.
- A gateway carries card details from an online checkout into processing. Authorize.Net's Gateway only plan, for businesses that already have a merchant account, costs $25 a month plus 10¢ per transaction and a 10¢ daily batch fee. Stripe's standard plan has no setup or monthly fee.
- Deposits move the money to your bank. Chase advertises deposits as soon as the same day, at no additional cost, into a Chase business checking account, while Square charges 1.95% per transfer for instant or same-day deposits.
Terminals, POS software, and chargeback handling can also be part of the package. Each of those gets its own guide.
One $40 sale, three prices from the same provider
Chase publishes three rates: 2.6% + 10¢ for tap, dip, or swipe; 2.9% + 25¢ for e-commerce; and 3.5% + 10¢ for manually keyed transactions and payment links.
On monthly charges, Chase says only that monthly fees may apply to certain products and pricing plans. Square says its Square Free plan has no monthly subscription, so you pay processing fees only when you take a payment. Both companies are selling merchant services. The percentage, the per-sale charge, and the monthly fee are the three numbers that make their offers comparable.
Sources
- squareup.com/us/en/payments/merchant-services
- squareup.com/us/en/payments/our-fees
- squareup.com/help/us/en/article/3807-deposit-options-with-square
- chase.com/business/payments/merchant-fees
- chase.com/business/support/payments/funding
- authorize.net/sign-up/pricing.html
- stripe.com/pricing
Related on this site
- Do you need a merchant account, a processor, and a gateway, or can one company cover all three?
- Is a merchant account just another business bank account?
- Who is your contract really with when you sign up through an ISO or a payment facilitator?
- Why does a keyed-in or online card payment cost a merchant more than a tapped one?
- Every provider we hold, and which publish a rate
- The three numbers behind a card rate
- Effective rate calculator
Written by Kaz (pen name). Figures are copied from providers' published pricing pages on the dates shown. We have not used these products. Corrections: contact form.