As a business owner looking for a way to receive credit card payments from your customers, you probably want a simple and cost-effective solution. So imagine the happiness at the thought of the possibility of doing so without paying anything to your merchant account provider. If the idea of a completely free merchant account sounds too good to be true to you, that’s because it is probably not true. Sure everyone loves free thing. But special care must be taken when dealing with providers that come with a promise of cost-free credit card processing.
Why business look for a free merchant account
There are different reasons why the idea of a free merchant account may sound appealing to you as a business owner. You are probably looking for a way to reduce costs on credit card processing in order to boost profit while improving access to your customers.
Some business owners may also prefer a cost-free merchant account because they are uncertain about credit card processing yet and are looking for a cheap way to test the waters. Of course, a free account will make that a lot easier for them to do.
High-risk businesses may also find the idea of a free merchant account a beautiful fantasy. Typically, businesses classified as high risk are charged higher transaction fees and rates than regular merchants due to fraud, chargebacks, and other nuances. For a business owner in such a niche, a provider offering you a way to limit the cost to the barest minimum would be a savior of some sort.
Common pitfalls of free merchant accounts
It is important to note that a free merchant account (in the strictest sense of the word) does really exists. If you are not paying for it upfront, there is a chance that you or someone else is paying for it indirectly through hidden fees or costs being passed off to your customers. Some of the likely hidden pitfalls with some so-called free merchant accounts include:
- Long contracts with heavy termination fees: while some providers claim to offer free accounts, they may lock you into long contracts that are difficult to wiggle your way out of. You may need to pay an early termination fee to get out of such a contract before the stipulated expiry date.
- Free now, pay later: some merchants offer you free services for a few months as a promotional offer only to hit you with heavy rates and costly transaction fees when you finally begin to pay for their services.
- Illegalities: some providers will indiscriminately pass up fees to customers in a bid to offer free services to merchants. But there are regulations and legislation that limit how businesses can pass up fees to their customers and where this can be done. You may end up losing your merchant account, get placed on a MATCH-list, or face other heavy sanctions by the card associations for unacceptable practices like this.
- Customer perception of your business: when your providers pass down processing fees and other costs to your customers indiscriminately, it may cost you to lose customers and affect their perception of your business.
It is impossible to find a truly “free” merchant account provider. But, there are companies that do not charge startup costs, monthly fees, and monthly minimums like others do. However, you may still be required to pay transaction fees, chargeback fees, interchange fees, and other unavoidable fees. It is safe to call providers like this “free merchant account” providers and it is companies like this that you should look out for in your search for a free merchant account.