Free Merchant Account

Some might say there is no free lunch anymore, but that’s not always true…or is it? While some internet merchant accounts may be free of upfront charges – they all charge you the discount rate. More on discount rates can be found in our article about merchant account fees.

Reasons why you might need/want a free internet merchant account:

• Obviously – you might have no money to get started
• No contracts
• No minimum usage/charges
• Easy to integrate with your website

Benefit of a free merchant account:

• Pretty much the same reasons as above…it’s FREE!!!
• Online reporting tools make tracking easy
• Some offer fraud and chargeback protection
• Some offer a money market fund to earn interest – like a savings account

Drawbacks of free merchant services:

• You usually get what you pay for – limited payment = limited service
• Limited integration with your website
• Harder to automate certain tasks such as receipts, shipping charges, etc
• Limited availability for shopping cart integration.

Who offers free merchant accounts?

The biggest by far is PayPal. These are industry veterans who are the leaders in merchant service innovations. They were bought out quite some time ago by eBay and they are the preferred payment processor for eBay merchants. If you have an eBay store – you have probably heard of them, but if not – we have a full PayPal review to learn more about the company. We also have more PayPal reviews and details in our directory where you can compare merchant accounts.

Google Checkout is also a rising star in the free merchant account services arena.  We also have a Google Checkout review for you to get familiar with their system and services. This can be a benefit because people seem to know the Google name very well and trust it.

How do free merchant services make money?

Well, it’s not exactly free. They have no setup, no monthly fee, no minimums, but they do charge the discount rate and a credit card transaction fee. To accept credit cards you will always pay these fees. There is really no way around them if you want to process credit cards.  These companies like PayPal and Google Checkout charge a bit higher discount rate and transaction fee. For example: with PayPal if you sell a $19.95 product you will pay about $0.88 in fees to net $19.07 approx. That’s almost 5% of the total sale. If you had your own merchant account through a quality provider that charged a statement fee each month – you might only pay 1.65% + $0.25 per transaction so it’s quite a savings if you do any amount of volume.

Our advice on free merchant accounts:

Start with a free merchant service for a short time. See what the charges are and if you can integrate well with your shopping cart system. If not, move on to a better provider.  Do some cost analysis each month and run monthly stats to show your total merchant services cost. Then project the costs with another provider and as soon as it looks like it’s going to save you money – do it! Make the switch before you get too locked in.