Setting up a merchant account requires investing in a lot of attendant stuff as well. For a functional merchant account, the trader must have a secure server, and processing software. Then there will be the routine payments he will have to make to the merchant service provider in the form of transaction fees, monthly fees etc. While the arrangement may work out satisfactorily for traders running larger businesses, it may not be equally beneficial for smaller traders.
Free credit card processing service providers are independent organizations that are ready to do card processing for those doing online businesses, which means that online payment processing is done free for those businesses by these service providers known variously as third party merchant account providers or third party credit card processors. Most of these free credit card processing services do not charge their customers anything by way of set up charges or monthly charges.
For those who are doing online business, the customers could be from all parts of the world and fast and free online payment processing offered by these providers are immensely beneficial to them. By using these services, payments come into the trader's account within minutes of customers making the payment. Further, free credit card processing services do not check the credit history of the user. Some of them even have the provision for assisting the trader by doing affiliate marketing for him.
The charge that the free credit card processing service takes from the trader is a percentage of the money that is transacted. So, when a buyer makes a payment of a hundred dollars to the trader, what he will actually get will only be somewhere around ninety five dollars. The remaining will go as the charges for online payment processing.
The percentage charges that users have to pay for transacting an amount by free credit card processing is slightly higher than what he will have to pay if he is using a merchant account. This may look a disadvantage on the face of it, and will really be a disadvantage for those who require online payment processing of large amounts consistently. For them it is safer to have a merchant account of their own.
However, for those running smaller businesses, free credit card processing will be more practical. When they add up the total investment costs, a merchant account will be too much of a financial burden for them. With free credit card processing services, even with the percentage charges slightly on the higher side, total expenditure will be less where amounts are small. By all criteria, free credit card processing services will be the better choice during the beginning stages of a business. If the volume of his business increases later, a trader can then shift from the free credit card processing option to the merchant account option.
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