A free merchant account allows your business to accept credit and debit cards without all the service fees, minimum balance fees, and security fees of a traditional merchant account. If your business doesn’t currently accept card payments, a free merchant account will enable you to do so with very little out-of-pocket cost. 

Traditional vs. Free Merchant Account

Merchants will always have to pay some fees to accept credit and debit cards. But a free merchant account will have significantly less overhead costs than a traditional merchant account.

Both free and traditional merchant accounts will charge the following card processing fees:

  • Interchange: The card issuer gets a percentage of the transaction amount. 
  • Assessment fee: The credit card association (Mastercard, Visa, etc.) takes a percentage of the transaction amount. 
  • Another percentage for every transaction: Your merchant bank will take a very small percentage of each transaction. 
  • A dollar amount for every transaction: Your merchant account provider makes money with a fee of a few cents from every transaction. 

These fees are usually quoted together. For example, 2.6% + $.10 includes all three percentages taken from the transaction, as well as the dollar amount taken from each transaction. 

Free merchant accounts make money by charging a higher percentage and dollar amount than traditional merchant accounts. But without the fees, free merchant accounts are usually a good option for businesses with less than $5,000 in monthly sales. 

Related: Payment Processing, Everything You Need to Know

Payment Service Providers

Most free merchant accounts are hosted by Payment Service Providers (PSPs). Because PSPs are structured to have lower operational costs they are able to avoid charging many of the fees of traditional merchant accounts.

Approval for a PSP account is given instantly, so you can avoid the lengthy application process of a traditional merchant account and get started processing card payments right away. 

Evaluating a Free Merchant Account

Cost

PSP accounts have a very simple pricing structure, with most fees limited to the processing fee and markup. But you still have to be aware of the costs of the processor hardware and upgrades. 

Many businesses grow out of PSPs and will eventually need a traditional merchant account. Make sure you don’t pay too much for hardware that you won’t be able to use in a few years.

Usage

Is your business online, in a storefront, or do you move between clients and customers? The free merchant account that you choose should offer payment solutions and seamless integrations for however you process your payments. 

Where Do I Go to Start Processing Cards?

Most of the merchant accounts on this list are PSPs. We have also included a couple of payment processing solutions which are hybrids between PSPs and traditional accounts. Like a PSP, these hybrid accounts require little to no initial investment. 

The following merchant accounts don’t charge any high or unexpected fees and have month-to-month contracts. Plus, they have a simple application process so that you can start accepting card payments right away.

Square

Square Overview

Square is a Payment Service Provider and makes the top of this list because of its versatility. Square offers a free card reader to first time users. The free card reader allows merchants to accept magstripe credit and debit card payments on their phones. For an additional $49, Square users can purchase a contactless EMV reader that accepts chip card and tap payments. Square users are also able to accept online payments, keyed-in payments, and invoices at no up-front cost. 

Square is the best free merchant service overall. It has a highly intuitive POS app with comprehensive reporting tools. In fact, the Square app can be used to track inventory and sales tax, making it a standalone solution for sales management. Earnings are automatically transferred to your business bank account within 36 hours of a transaction. 

Square was developed as a payment solution for businesses that move around. It’s the best free merchant account for mobile businesses, such as farmers’ markets and independent contractors that want to accept card payments.

Square Processing Fees

Mobile Payments: Magstripe cards, chip cards, contactless NFC payments, and swiped virtual terminal payments all have a flat processing fee of 2.6% + $.10. These types of payments make up the majority of Square payments.

Card-not-present payments: When no card is present for payment – including card-on-file payments any keyed-in payments – have associated fees of 3.5% + $.15. 

Online Payments: Online payments including invoices, Square online API payments, and eCommerce card-on-file payments have associated fees of 2.9% + $.30. 

Refund Fee: None

Chargeback: No fee, but a temporary hold will be placed on the funds. 

ACH Processing: Square does not offer ACH processing.

Square Integrations

Square recently opened its platform to integrations with a long list of third-party apps, including popular platforms like QuickBooks, Xero, TaxJar, ShipStation, and WooCommerce. You can find the entire list of Square integrations on Square’s app marketplace

Square Add-Ons 

Square Free Merchant Account

Square Register – $799.99

Square Register is a point-of-sale solution for brick-and-mortar stores that would like to have a permanent payment processing setup. The Register comes with a sleek POS touchscreen for the counter, and a separate detachable display just for the customer. 

The Square Register accepts all magstripe and chipped major credit cards and contactless payments. The processing rate for the Register is the same 2.6% + $.10. 

Businesses that process more than $250 thousand in yearly sales can contact Square for a custom processing rate. This rate may be closer to the lower rate you would get with a traditional merchant account. 

From Square’s shop, you can purchase accessories for the Register, including:

  • 16 inch Printer-Driven Cash Drawer – $129
  • 16 inch USB Cash Drawer – $249
  • USB receipt printer – $299
  • USB Bar Code Scanner – $119.00

Square Terminal – $299.00

Square Terminal is a semi-portable payment processing solution. The Terminal is smaller than the Register as it only includes a single display. But the Terminal can print the receipt, so you don’t need to purchase separate printing hardware. 

The Terminal accepts all magstripe and chip cards, and it also has a 2.6% + $.10 processing fee. 

Square Online

Square has payment processing solutions for businesses that want to sell online. All four of Square’s plans for e-commerce businesses allow you to fully design and launch an online store. The web hosting is totally free, but custom domains start a $12 per month. 

Free: The free plan lets you sell unlimited products, track inventory, and sync with your Square POS. You can also offer pickup, delivery, and shipping with the free plan. 

Professional: The Professional plan costs $12 per month. It includes all the free Square Online features, as well as the ability to publish a custom domain with no Square branding or ads. 

Performance: Performance costs $26 per month and includes all of the previously mentioned features, as well as the ability to post customer reviews, fulfill orders and save with discounted shipping labels, and recover lost sales with automated emails. 

Premium: Premium costs $72 per month. It includes all of the Performance features, plus a $.03 savings on transaction fees, the highest discounts on shipping rates, and a real-time shipping rate calculator. 

All Square Online plans (except the Premium plan) have a 2.9% + $.30 per transaction processing fee. 

PayPal

PayPal is a PSP that was originally limited to online payments. The company recently developed PayPal Here to compete with Square as a solution for in-person payment processing. PayPal Here offers a free chip and magstripe card reader for new PayPal accounts. 

Like Square, PayPal users download a free POS app to track sales data and inventory. The major difference is that earnings go directly to the user’s PayPal account. Funds then have to be manually transferred from PayPal to the business bank account. 

PayPal is the best free merchant account for businesses that are primarily e-commerce but who occasionally hold in-person events. For example, an e-commerce business that does pop-up shops or attends a farmers’ market can integrate their in-person payments with their regular business payments. 

Keep in mind that PayPal’s customer service is extremely difficult to get a hold of. This can be a major problem if you get locked out of your PayPal account or have issues with payment processing. 

PayPal Processing Fees

Mobile payments: In-person magstripe, chip, and contactless NFC card payments pay a 2.7% processing rate. 

Card-Not-Present: Keyed-in transactions pay a 3.5% + $.15 processing fee. 

Online: Ecommerce payments have a 3.5% + $.30 processing fee. 

Chargeback fee: $20

Refund fee: The cost of the original transaction fee.

ACH processing: PayPal does not offer ACH processing.

Also note that a 1.5% added fee is placed on non-US cards. 

PayPal Integrations

PayPal has one of the highest numbers of integrations of any free merchant account on this list. PayPal Checkout can be easily added as a standalone payment option on most popular website hosts including Shopify and WordPress. With the help of a developer, PayPal Checkout can be added to virtually any online location that needs to accept payments. 

PayPal Add-Ons

Chip & Tap Reader $59.99

If you’d like to accept contactless tap payments as well as chip and magstripe cards, this reader is a 3-in-1 option for doing so. It connects with the app via Bluetooth, so it doesn’t have to stay attached to your phone. 

PayPal Virtual Terminal

PayPal Virtual Terminal allows businesses to collect online payments anywhere they have internet access when no card is present. It is a payment processing solution for merchants that need to collect payment information over the phone or by fax. With Virtual Terminal, you can serve customers that prefer not to pay online.

This service costs $30 per month, and the processing fees for such transactions are 2.9% + $.30.

Stripe

Stripe is a PSP that is quickly making a name for itself as an excellent alternative to PayPal. It has one of the most powerful and easy-to-use API’s of all the payment processors we have looked at, so almost any website can use Stripe to capture online payments. 

Stripe has extended its hand to in-person card payments with Stripe Terminal. Unlike Square and PayPal, Stripe doesn’t have a proprietary card reader. Instead, you have to purchase a pre-certified card reader (BBPOS Chipper for $59) or the terminal (Verifone P400 for $299) to accept magstripe, chip, and NFC contactless payments. 

Stripe is an excellent mostly-online store that has a high volume of sales and who would like to consolidate in-person payments. It has a higher upfront cost for the hardware, but with a little coding you’ll be able to use Stripe any devices you buy in the future. 

One of Stripe’s best features is the 24 hour customer support via the phone and online chat. 

Stripe Processing Fees

Stripe has the lowest processing fees of any of the free merchant accounts. 

Mobile Payments: Any payments made via the Stripe card readers have a 2.7% + $.05 processing fee. 

Online Payments: Online payments have a 2.9% + $.30 processing fee. 

Chargebacks: $15

Refund: No fee

ACH Debits and Transfers: .8% with a $5 cap

Stripe Integrations 

Stripe can integrate with practically any website and third-party app. Take a look here to explore Stripe’s large database of apps and extensions that can be integrated without any coding. If there is an application that is not listed in this database, you can explore Stripe’s database of development experts that will integrate Stripe with any online platform.

You should know that Stripe payments go directly to Stripe and not through a server. This makes Stripe a secure payment option no matter what third-party it is being used with. Because of Stripe’s integrations, high level of security, and low processing fees, Stripe is the most scalable free merchant account on this list. 

Stripe Add-Ons

Stripe Connect

With Stripe Connect, users of any website can accept payments with Stripe. Stripe Connect Standard is essentially the same service as Stripe – your users can directly accept payments. But Connect has two more service options, each of which costs $2 per monthly active account and 2.5% + $.25 per payout. 

Stripe Connect Express – Express allows customization of the payments process with co-branding options and tailored payout timing and pricing. 

Stripe Connect Custom – Custom lets your users white-label payments. This payment service has the most flexible API with optional co-branded onboarding, as well as tailored payout timing and pricing. 

Stripe Climate

With Stripe, merchants can dedicate a small percentage of earnings  (either 0.5%, 1.00%, or 1.5%) from each transaction to carbon offsets. This money towards carbon offsets can come from both in-person payments and online payments. Stripe Climate is a great way to help mitigate the environmental impact of doing business.

Stripe Issuing

Your business can create custom virtual and physical credit cards in just seconds using Stripe Issuing. This add-on is helpful to businesses that need employee-designated credit cards with limits on monthly spending and merchant categories.

Your business can fully customize both physical and virtual cards with your own branding, and upload the cards to digital wallets. Virtual cards cost only $.10, and physical cards cost only $.3. Amazingly, Stripe-issued cards have transaction fees waived for the first $500k of transactions, and after that, the cost is only %.02 + $.20 per transaction. 

Stripe Capital

If your business is in need of a loan, Stripe Capital may be able to get you fast access to funding. Instead of basing your loan on your credit score and going through a lengthy application process, Stripe Capital bases your eligibility on your history with Stripe. Your funds arrive the next business day and are deposited directly into your Stripe account. 

You pay back your loan automatically with a fixed percentage of your daily sales until your loan is repaid. Better yet, Stripe Capital does not apply any compounding interest or late fees to your loan. So if your business makes zero sales on a certain day, you won’t owe any money.

Wave

Wave Accounting Logo

Wave is not really a PSP, but a free bookkeeping software that allows users to send invoices. Unlike the other options on this list, Wave does not offer any hardware to accept in-person payments, nor does Wave have the capability to integrate with websites for processing credit and debit cards online. 

That said, Wave is still a great option for independent contractors whose clients pay primarily through invoices. Your clients are able to pay the invoice directly by entering their credit or debit card number. Plus, Wave invoices are professional and can be tailored to your brand.  

Wave keeps payments simple, and being able to track and categorize expenses with the free Wave app is a great bonus. You should note that in order to get customer support, you must submit a support request. There is no direct number with which you can get help if you have an issue with transferring funds. 

Wave Processing Fees

Invoices: Wave charges 2.9% + $.30 for most invoices, but the rate increases to 3.4% + $.30 for invoices paid with American Express cards. 

Chargebacks: $15 fee, but refunded if you win the dispute. 

ACH Fees: 1% with a $1 minimum. 

Wave Integrations

When it comes to payment processing, Wave doesn’t have nearly as many integrations as Square, PayPal, and Stripe. However, Wave can link directly to your bank account and deposit earnings from your invoices within two business days. 

Wave Add-Ons

No payment processing add-ons or upgrades are available with for Wave.

Wave Payroll

Wave has a low-cost payroll service that deposits funds directly into your employees’ bank accounts. Employee payouts are recorded directly in the free Wave software. In fourteen states, Wave can even complete and file the state and federal payroll taxes. 

In those fourteen tax-service payroll states, Wave Payroll costs $35 per month with $6 per employee or individual contractor. In all other states, Wave Payroll costs $20 per month with the same $6 per employee or individual contractor. 

Chase Merchant Services

Chase Merchant Services – also known as Chase Paymentech – is actually a hybrid between a PSP and a traditional merchant account. But because of its very low fees, it is a worthy contender as a low-cost merchant account. Chase’s answer to Square and PayPal card readers is Chase QuickAccept, which is a magstripe, chip, and contactless card reader that is provided for free when you enroll in the Chase merchant account. 

Chase Merchant Services is a good option for businesses that already have a bank account with Chase, as you have to have a Chase Business Complete Banking account to even use the service. The free Chase Mobile Checkout is used for accepting payments and managing inventory. You can accept online payments by enrolling in Chase WePay, which also offers same-day deposits. 

One benefit of using Chase Merchant Services is that all deposits are same-day, and you’ll get the same tailored customer service that you get with your business checking account. 

Chase Merchant Services Processing Fees

Mobile Payments: Magstripe, chip, or contactless NFC cards using QuickAccept reader pay a 2.6% + $.10 processing fee

Card-Not-Present: Keyed-in payments have a 3.5% + $.10 processing fee. 

Online (WePay): 2.9% + $.30 per transaction

ACH (WePay): 1% + $.30 per transaction

Chase Merchant Services can also offer Chase Interchange Plus pricing, which can have lower processing fees, but fees vary. 

Chase Merchant Services Integrations

On its own, Chase Merchant Services doesn’t have many integrations. But because Chase acquired WePay, Chase Merchant Services will integrate with popular online platforms like Shopify, WooCommerce, and Volusion. 

If there is a platform on which you would like to accept payments, you can hire a developer to integrate Chase with third-party apps and websites for payment processing. However, Stripe and PayPal have more code-free integrations than Chase Merchant Services. So if you need to capture payments across many different websites, you might be better off using Stripe or PayPal. 

Chase Merchant Services Add-Ons

Industry-Specific POS Software

Every business has different administrative tasks and requirements for tracking inventory and services. Chase Merchant Services can help you set up a payment processing system that is tailored to and compliant with the service, healthcare, restaurant, retail, and e-commerce industries. You’ll have to contact Chase to get a customized quote on these services. 

Chase Standalone Terminal

Chase offers a variety of terminals and card-readers for rent. These have the same processing fees as the Chase QuickAccept card reader, but you will need to sign up for a long-term contract to access these readers. Chase does not disclose the pricing of alternative card readers on its website. Reach out to your Chase Business banker for rental quotes. 

Final Word on Free Merchant Accounts

With so many payment services competing to win over the in-person payment processing market, it’s easy to get started accepting credit and debit cards with little upfront cost. Small businesses with less than $5,000 in monthly sales should take advantage of free to low-cost hardware available from PSPs and PSP-hybrids.

Make sure to choose a merchant account that will best serve your customers. If your customers are online, Stripe or PayPal is your best bet. If your business is in-person, Square is probably the best choice. If you are an independent contractor, you can keep payments simple by using Wave for invoices and expense tracking. 

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