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Best Merchant Services for Small Businesses

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Last editedFeb 20222 min read

Anyone starting a small business understands that there are a number of challenges to overcome as you establish your company. Of course, the first steps include developing a great product or service and investing in the right marketing strategy to attract a loyal customer base. Once you’ve achieved all this, you need to determine the right way to accept payments from these customers.

This is where merchant services come in. Basically, this refers to the different methods that a business can use to accept and process payments from a customer, whether these come from credit cards, debit cards, electronic payments or other alternative methods. Keep reading to find out more about merchant services and which to choose for your small business.

What are 'merchant services'?

Before getting into the best merchant services for small businesses, it’s important to first answer the question: “what are merchant services?”. In summary, they refer to the mechanisms and equipment that you as a merchant use to accept payments from your customers, whether these are online or in person. In other words, these are the services that allow you to take payments from credit cards, debit cards and other electronic methods.

You might also be wondering “who is a merchant?”. Well, this term is simply a way to refer to a person or limited company that sells products or services. If you own a business that sells goods or a service, then you are a merchant.

There are a variety of different providers of merchant services. These include banks, point-of-sale manufacturers, credit card companies and various other businesses. Some typical examples of merchant services include:

  • Online payment gateways, which are a form of software that allows you to accept payments online.

  • Card readers, which are devices that are used to accept in-person payments by debit or credit card.

  • eCommerce platforms, software that allows you to set up an online shop.

  • Financing services such as cash advances or business loans.

  • Point-of-sale (POS) systems, which refers to equipment used to take customer payments.

What are the best merchant services for small businesses?

It’s difficult to say what the best merchant services are, since this will depend on the specific needs of your business. It’s important to do plenty of research so that you’re aware of all the different features and so that you know what to look for. Some factors that you should take into consideration include:

  • Do they provide the software and services that are necessary for running your business? For example, if you want to sell goods online, do they offer an e-commerce platform that allows you to accept electronic payments?

  • What sort of protection do they offer against fraud?

  • Is the service scalable? Can it grow as your business grows?

  • What are their customer support options? Are they generally responsive and easy to reach?

  • How much does it cost? Are there any hidden fees?

What are the cheapest merchant services for small businesses?

Naturally, after thinking about which are most appropriate for your business, you’ll probably be asking: “what are the cheapest merchant services for small businesses?”. To find the best option for you, it’s a good idea to get an understanding of how the charges for merchant services work.

There are three common models for payment: flat rate, tiered, and interchange plus.

In flat rate, the processor charges a fixed fee for all card transactions, which is usually a percentage base rate and that may also include a per-transaction fee.

In a tiered rate, the fees are based on the card type that is used and the amount of risk associated with the transaction. This can be the most confusing for merchants and can therefore result in you paying more than expected.

In the interchange plus model, which is the most common, the merchant is charged an interchange rate plus a fixed per-transaction fee. This is considered the most transparent model.

With this in mind, you can make a better assessment of which merchant services offer the best value for money.

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GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with ad hoc or recurring payments.

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