Alternative ways to take credit cards. Ditch your merchant account!

Mobile hot dog vendor accepts a credit card payment with a Square reader.

Business today is too mobile and too flexible to stick with inflexible traditional merchant accounts for credit card processing. New options are here and tip the scales in favor of small businesses.


Taking credit cards used to be a big deal for small businesses. It involved setting up a merchant account, passing a credit check, leasing or buying equipment and agreeing to a multi-year commitment. That was just the getting started part. The traditional merchant processing industry standard seemed to be lots of fees, and little customer service for small accounts. It has been a source of ongoing pain for small business, but everything has changed.

A number of companies have introduced dead-simple tools to accept credit cards with nothing more than a tiny plastic reader that plugs into a smart phone. Fees are lower, and there is no commitment.

Should you convert from traditional merchant processing? I did. Here’s how I decided.

Compare Total Costs
You can’t just compare the low teaser rate that merchant processors quote. You have to consider the total effective cost for processing.

My store’s “qualified rate” was 1.55%. Sounds fine, but it doesn’t take into account all the other fees I paid. I took my monthly processing statement, added up all the fees, deductions, costs, charges, etc., and divided that by the total amount processed. I did that for several different months, and our total effective cost was 3.1% to 3.3%. I also had a leased credit card terminal for $35.67 per month. I was more than ready to eliminate that lease and put that money towards acquiring some new equipment.

What are the choices?

All these new systems share some similarities.

  • They use a small plastic reader that plugs into the headphone jack on your smartphone or tablet.
  • There is no charge for the reader, or $15 for Breadcrumb’s reader. With Square or PayPal Here, you may be able to buy a reader at a store for about $15 and ask for a refund later.
  • There are no monthly fees, so you can sign up and keep one on hand even if you only process credit cards on occasion.
  • You can use it to charge credit card sales from anywhere (as long as you can get cell signal for smartphones or wifi for tablets).
  • You can have more than one user on your account, all collecting payments at the same time.
  • They charge a percentage of transactions, under 3%. Hand-keyed transactions are higher, usually between 3% and 4%. Hand-keyed transactions may be held and not deposited to you immediately.
  • There are no (or very few) additional fees.
  • Most offer a way for customers to pay with their phone instead of their credit card.
  • Note that these rates and details can and do change all the time. I’ll add updates as I get them. Do check for yourself and confirm the details on any of these services before you make any decisions.

Square has been around for several years. This is what I initially chose for my bricks-and-mortar retail business.

  • Reader: A small white square that can twist a little while swiping cards. Works with iPhones, iPads, and some Android smartphones.
  • Cost: The total effective cost is 2.75% per transaction. There is a monthly flat rate available for high-volume businesses that can drive the effective rate lower, but you may have to contact Square to inquire about it.
  • How you get paid: Funds are transferred nightly into your business checking account.
  • Mobile Payments: Square offers a mobile payment option. Customers create their own account with Square, then only need to bring their compatible phone with them to complete their payment.
  • Bonus: Square has an iPad app designed to use as a Point of Sale system, handy for bricks and mortar locations.

Intuit GoPayment
Intuit GoPayment  is backed by accounting software giant Intuit.

  • Reader: A grey bar as wide as a phone that is stable while swiping cards. GoPayment works with iPhone, iPad, iPod Touch and many Android phones.
  • Cost: Most cards are 2.75% with no transaction fee. American Express and rewards cards are treated differently (more expensively). Higher volume businesses can choose a monthly fee and get a lower rate on transactions, potentially under 2.0%.
  • How you get paid: Funds are transferred nightly into your business checking account or onto a special Prepaid Visa card account.
  • Mobile Payments: GoPayment does not include a system for customers to pay using their phone.
  • Bonus: Transactions can be downloaded into QuickBooks software.

PayPal Here

PayPal Here is backed by online-payment giant PayPal.

  • Reader: A blue/purple triangle, with a small brace to hold it still while swiping. Works on iPhone, iPad, and some Android phones.
  • Cost: the rate is 2.7% on swiped transactions. There is no monthly pricing option for high-volume merchants.
  • How you get paid: funds are deposited into your PayPal account or can be put onto a special Debit MasterCard account. There is not an option to have funds automatically transferred to a checking account.
  • Mobile Payments: Customers can pay without cash or cards using their PayPal account via the PayPal app on their smartphone.
  • Bonus: PayPal Here can accept a wider variety of payment types. I mentioned that it can pull from a customer’s PayPal account using their smartphone. It can also generate and email an invoice to customers, so they can pay from their PayPal account. It can also accept checks by snapping a picture of the check to deposit it. There is no transaction fee at all for accepting checks.
  • Bonus: It also has an iPad app designed to use as a Point of Sale system, handy for bricks and mortar locations.

Groupon Breadcrumb

Breadcrumb was introduced by daily deals giant Groupon.

  • Reader: A black oblong shape, it offers a longer swiping path for stability. Works on iPhone, iPad, some Androids phones, and PCs/laptops. The reader costs $15. The processing service can be used with certain existing credit card terminals.
  • Cost: Visa and Mastercard rates are 1.99% + 15 cents per swipe. AMEX is higher and varies based on your industry.
  • How you get paid: funds are deposited into your bank account the next business day.
  • Mobile Payments: Breadcrumb does not include a system for customers to pay using their phone.
  • Bonus: integrates with Groupon vouchers, if your business issues them.
  • Bonus: two separate point of sale apps and plans are available, one specifically for restaurants.

Which do I choose?
That depends on your business. QuickBooks users may favor Intuit’s GoPayment. Businesses that depend on PayPal may jump on PayPal Here. But because there is no commitment or monthly fee, there is no reason a small business might not try out all of them.

Keep your eyes on Dwolla
Dwolla is based on cash instead of credit cards. I applaud that. It does require both the customer and the merchant to have an account. Then the customer initiates the transaction, instead of the vendor. It is going to take time for this to reach critical mass in my small town.

A non-traditional merchant account option
Payment Revolution is a traditional merchant processor, but without the long-term contract. It allows month-to-month service. The only monthly fee is a $10 statement fee. All transactions run at a set percentage over the interchange rates. That does mean complex statements and lots of variation between transactions. Rewards cards get charged at higher rates, and you may have 7 different rates just for MasterCard on your statement. If you want to try traditional merchant processing without making a long-term commitment, consider Payment Revolution.

UPDATE, Dec 2013:

Over at, they’ve profiled these payment processors and a couple that are new to me. Take a look at their Smartphone Credit Card Readers article, and while you’re there look around. Sign up for their updates, too. They’re long-time small business friends of ours.

Wave, maker of a deservedly-popular suite of accounting and finance apps for small business, has introduced a get-paid-anywhere system. There is no hardware reader needed; just take a photo of the card. The cost is 30 cents plus 2.9% per payment. Other payment types like cash can also be accepted and receipts sent from the app. Data integrates automatically into the Wave Accounting system. Get a quick overview and link to Wave’s app here.

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About Becky McCray

Becky started Small Biz Survival in 2006 to share rural business and community building stories and ideas with other small town business people. She and her husband own a retail liquor store in Alva, Oklahoma, and a small cattle ranch nearby. Becky is an international speaker on small business.

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  1. says

    Hi Becky, I had no idea how many solutions for small business credit card processing were out there!
    We had recently checked with our bank about their merchant services, and determined it wasn’t in our favor. We stuck with PayPal (not PayPal Here). Most of our clients pay by check, but we like to have the option of offering them the ability to pay by card if they prefer.
    But we do have clients that accept credit cards “on the go,” so I’ll be pointing them to your post! Who knows? They might be about to save some extra money every month!
    Thanks for your post!

    • says

      Thanks, Tracy. I’m sure this will be outdated soon, maybe even tomorrow! But I wanted to give a rundown of the systems I know of today. With all these options, everyone can find something that works for their business.

  2. says

    I agree this is a very helpful summary of current merchant service options.

    We’ve been using Square for ~18 months and have been very happy. In our first year-to-year comparison, we shaved 45% off our merchant service fees. While the base rates are competitive, it’s the pile of extraneous fees that conventional providers assess that really eat into your bottom line.

    What I most appreciate about these start-up services, is that they give customers (i.e. small biz owners) options that didn’t exist before. We still get cold calls from merchant service providers who offer to look at our statements and they’ll (naturally!) identify pitfalls of using Square. That’s like letting the fox watch the chickens! Informed consumers should understand their billing statements and often know more about the merchant service processors than their salesforce.

    Thanks for posting this!

    • says

      Thank you, Brian. You are so right about the fees! Those low teaser rates are meaningless without knowing the fees. We stuck with Square for a long time, but since they don’t integrate with our point of sale system, we’ve recently changed. But that’s a story for next week.

  3. geoff says

    Hey Becky, this is a great list of options for taking credit cards in store. I hadn’t heard of a couple of them before. Have you done a similar list for online options?

  4. Dwight Smith says

    Hey Becky – fantastic article! Was about to go with a merchant processor via my credit union, but your article saved the day! I’ll check out these alternatives. Thanks a bunch!

    • says

      Dwight, I’m excited you have more alternatives now. Be sure to compare the effective rates, taking into account all the fees. That’s what makes the difference.

  5. Julie Perdigao says

    Is Square really the awful company everyone say it is? We have an auto body shop and only take about 3-5 cards a month and the final sale amount varies greatly. What is eating me alive are the specialty cards. Square sounds like the perfect solution for us but it scares me that they hold the money if the amount doesn’t fit their profile for me. I can have a $100 sale or a $4000 sale. Any advise?

    • says

      Julie, I personally had no problems with Square. They did not ever hold our money or create any other problem in our business.

      Here’s what I would do if I were you. I would go down this list of alternatives. I’d look for a phone number for customer service or at least sales. I’d call and ask about how they’d handle these situations. Then I’d also check the others on this list: A Rundown of Square + Six Other Smartphone Credit Card Readers at If you can’t get someone on the phone now, you probably can’t get someone on the phone when the chips are down.

  6. Sandi Russs says

    Hi Becky, I have been in business for 20 years and have as yet not accepted any credit or debit cards. Every few years I look into it; survey my clients and ask if they are willing to pay a higher price in order for me to accept cards and they all say no and keep paying me with their local checks at my better prices. Being a service business (massage therapy) and being small, this has worked for me; however I am looking at opening a gift store on my premises and am beginning my research yet again. I came across your site and want to thank you for your info. I also want to ask a question regarding something that my bank included in their quote. It was a $6/mo fee to cover “audits” that they say are periodically required and would otherwise cost me about $20k. In your articles I do not see any mention of this. Is this new and what can you tell me about it? Is it required on these readers as well? Last but not least, you don’t’ mention debit cards. It appears to me that credit cards are accepted by these reader companies but not debit cards. Am I interpreting that correctly and that you would need another system to accept debit cards?

    • says

      Sandi, thanks for taking time to comment. One problem with surveying your existing customers is that you don’t take cards now. That means people who have a very strong preference have already taken their business elsewhere without ever telling you. So your survey misses the potential customers you might be losing by not accepting cards. I think it’s very wise to consider accepting cards for all your services when you start your gift store.

      Because the difference in your cost would be less than 3%, it’s not that hard to work in a very small price increase to cover the cost. Or consider moving to Dwolla which would have a much lower cost of 25 cents per transaction.

      The “audits” your bank is charging for is probably PCI compliance. (You can learn all about it from the PCI Security Standards Council, but it’s very boring stuff.) In short, it’s the industry standard for securing customer credit card data. Various credit card processors handle PCI compliance in different ways. My old fashioned traditional merchant account relied on me to secure the data at my end, required that I complete their survey to prove it, and then charged me $10 per month to certify me as PCI compliant. That is in fact what drove me to find Square as an alternative to them. With Square, the PCI compliance is designed into the service. With my current service Payment Revolution, once again PCI compliance is built in and does not cost extra. To find out how any other online service handles this, go to their help or support area and search for “PCI compliance.” Under no circumstances should a small independent gift store be paying $20,000 for audits to ensure PCI compliance. I’m guessing that reflects what the bank itself would pay for an outside audit of their own PCI compliance.

      All these systems accept debit cards right along with credit cards. Debit cards are treated just the same as credit cards when you make a sale. In some cases, the debit cards are charged a different rate, but there is nothing you have to do at your end. The system manages that automatically.