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Credit Card Processing
Without A Merchant Account

If you are going to be selling online, you will need credit card processing services. But do you need a merchant account?

The traditional way to implement credit card processing is to obtain your own merchant account and card processing services. However, in recent years a number of companies have entered the market with a new approach, one that short circuits the need to be accepted for a merchant account.

credit card processing without a merchant account Six of the best of these credit card processing companies and their unique processing solutions are reviewed for you below.

understanding credit card processing without a merchant account

Sidenote: Before reading about card processing without a merchant account, take The Nine Minute Tutorial. It will provide you with a basic understanding of what is involved in finding a merchant account provider and processing service, the types of costs you can expect to incur and how to select the best credit card processing provider for your particular business. 
You may also want to take a look at our sections on Low Cost Merchant Accounts and on High Risk Merchant Accounts (if you have a poor credit history, high sales volumes, or need an international or offshore merchant account).

For reasons we will soon see, these third party credit card processing services are usually a preferable alternative only for new businesses that sell tangible goods or digital products (not services), with low monthly sales volumes. 

The features and services offered by these third party processing services vary significantly from one to another, so it is highly advisable for the merchant to carefully review all aspects of the service being offered, by examining the providers' websites thoroughly - and asking questions for any issues that arise. 

There are both advantages and disadvantages in using a third party credit card processing service, as compared to obtaining your own merchant account for your credit card processing needs. 

To make things simpler, we'll call third party providers "TP's", and traditional merchant account providers "MAP's".


It is much quicker and easier to sign up with TP's than with MAP's, so you can be up and selling sooner. 

TP's usually do not charge any start-up fees. 

MAP's levy a considerable variety of credit card processing and monthly fees to their merchants, which means that even if you sell nothing from your website in a particular month, you'll still be paying your MAP some fees. 

As mentioned, if your site has a low volume of monthly sales, you will probably pay less using TP's each month than with MAP's. 

TP's handle a good portion of your customer support requirements, at least as far as they relate to credit card processing (as opposed to product delivery, etc.). 

With most TP's, if a customer returns a product, TP's refund the fees you paid.

It is often easier for non U.S.-based businesses to sign up with TP's than with MAP's.


TP's credit card processing fees are higher than MAP's, usually falling in the 4% to 20% range, compared to the 2.2% to 2.5% charged by MAP's. Once your volumes start to grow, you will probably be paying more in overall costs with TP's than with MAP's.

TP's usually pay your net sales proceeds to you every several weeks, compared to the 2 to 3 day payout with MAP's.

Some TP's insist on a holdback, where they retain or reserve a percentage of your sales as security, to protect themselves against chargeback claims from your customers. MAP's usually only use reserves with high risk merchants

With TP's, you will have less control over how your customers' credit card processing transpires (since the TP's have to be involved in returns, chargebacks, etc.). 

If you are selling services from your website, you will have a hard time finding TP's who will accept your business. Usually only tangible products, and in some instances digital products (that can be downloaded directly from your website to the customer) are acceptable to TP's. 

Some TP's charge a membership fee and charge a fee each time you add a new product for sale. 

With MAP's services, you will be able to have access to a lot more comprehensive information about your customers, since they provide their personal data to you, rather than to the TP's. 

In most cases, you will have to use the TP's shopping cart system, so you have no control over its look and feel.

To many consumers, being transferred out from your website to submit their credit card and personal data to TP's is troubling. As a result, you may find that many potential customers who were ready to order, abandon their purchase when they arrive at the TP's site. The "signal" they get when they discover they are being transferred out from your site for credit card processing can negatively affect your credibility.

Here is one quick example to illustrate how TP's can provide a good credit card processing solution for the low volume start-up website, but why they may not be the best option once your sales start to increase. 

Let's assume the TP provider charges you only one flat fee, 6% of sales. On the other hand the MAP charges you 2.4% of sales as the discount rate, 30 cents per transaction, has a monthly minimum of $25, and has other monthly statement, gateway and leasing fees totaling $50. 

If you sell 20 items per month averaging a $25 sales price (a total of $500 in sales), which credit card processing service is cheaper? 

Well, with the TP you would pay a total of $30 ($500 times 6%). 

But with the MAP, you would pay $12 for the discount rate, another $13 to reach your monthly minimum (of $25), $6 in per-transaction fees, and $50 in monthly fees. The total: $81, compared to the TP's total of $50. 

Now, let's assume your business grows and your credit card processing volume is now 200 items per month at $25 each (a total of $5,000 in sales). The TP will now charge you $300. 

On the other hand, with the MAP you would pay $120 for the discount rate, nothing for the monthly minimum, $60 in per-transaction fees, and $50 in monthly fees. The total: $230, compared to the TP's total of $300.

If you are serious about signing on with a TP, besides the monetary issues and the issues we have already raised:

do whatever you can to look into the background, history and financial stability of the TP. Make sure you are confident it will still be around in a year. 

evaluate the effect using the TP will have on your customers. Will they be comfortable with the credit card processing being handled by the TP? 

when choosing between TP's, carefully consider all of the credit card processing costs and all the terms of use each requires. Study their websites carefully and ask questions.

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Below are six reputable vendors of third party credit card processing services. Please keep in mind the issues addressed above and those discussed in The Nine Minute Tutorial concerning how to select the best provider for your particular needs. 

All fees quoted below are as of December 31, 2004. As fees are revised from time to time, be sure to check their websites and to speak with their representatives to ensure the fees mentioned here are still up-to-date. Discount fees quoted are for VISA and MasterCard. Contact the third party processing providers for rates for other card issuers.

Ematic Inc

Ematic offers instant approval (as long as you are not selling a restricted product). You can enjoy credit card processing for products, services, subscriptions and memberships.

Ematic provides a shopping cart (or you can use your own), order buttons, virtual terminal and you can also process phone and mail orders.

Payout is 10 days, 15 days for international merchants. It offers a 30 day money back guarantee.


Set-up Fee: $49.00 

Processing Fee: 5.0%  

Reserve: 10% per transaction 

Transaction Fee: not stated 

Chargeback Fee: not stated 

Monthly Fee: $19.95 

To check out their website:

Ematic Inc


PayPal's credit card processing services are available for both U.S.and international merchants (37 countries).

It provides a free shopping cart that is actually integrated into the merchant's own website. However, the system provides no allowance for variations of a single product. So if for example you sell clothes that come in different sizes, you would need a separate order button for each size.

Customers can also debit their checking accounts, rather than using a credit card.

Its system also allows you to download customer data into Quicken and other accounting management programs.

Monies can be transferred from your PayPal account to your local checking account directly.

For a thorough review of PayPal's credit card processing services, you may wish to read Ralph Wilson's article published in Web Marketing Today.


Set-up Fee: None 

Processing Fee: 2.9% (3.9% if the customer is from another country, except Canada for U.S.merchants)

Transaction Fee: 30 cents per transaction 

Monthly Fees: None 

Chargeback Fee: Unknown  

To check out their website:



ClickBank specializes in businesses whose products are digital and are offered for sale to website customers through downloads. Merchants promote their products using the services of over 100,000 affiliated online marketers. 

Merchants of digital products simply place a sales link on their site. Clickbank handles the credit card processing and pays merchants twice monthly.

E-check payments are now also accepted.


Set-up Fee: $49.95 one-time payment 

Processing Fee: 7.5% 

Transaction Fee: $1 per transaction 

Monthly Fee: None 

Chargeback Fee: Unknown 

To check out their website:



"Bizhosting provides everything needed to sell products online in one simple, integrated service, and allows merchants to focus on building their business instead of managing their web site. Bizhosting is our choice for Ecommerce Web Host of the Year (2002)” – Best Web Hosting.

Setting up an online store really can be easy! Just point, click -- transfer, copy, write, save -- and launch.

Control all shopping activities directly 

Create easy-to-use online store catalog 

Simply manage all customer communications  

In order to process credit cards automatically (in real-time), or, if you don't already have a merchant account, select either Bizhosting’s Value Hosting package or their Professional Hosting package at sign-up. After you signup for one of these paid hosting packages you will be able to accept credit cards on your site. You will be asked to select a merchant account that is best for you after you signup. They even offer a very low cost ProPay merchant account. International orders can be accepted too.

To check out their website:

Bizhosting Credit Card Processing


iBill can allow your website to sell products, services or subscriptions, as well as accept online checks.

For product sales, you can accept all major credit cards, with multiple options (for size, color, etc.) from the shopping cart provided. For $9.95 per month, iBill's storebuilder can create your website and host it for up to 100 products. The storebuilder option includes shipping and state sales tax calculators. Maximum item price is $500. Payment to the merchant is made once monthly. 

iBill also has three programs that will allow you credit card processing for subscriptions and for intangible products such as downloads (or selling picks of the day, horoscopes, mailing lists, etc.). Payment is made twice monthly.


Processing Fee: 12% to 15% based on sales volume 

Transaction Fee: None 

Monthly Fee: $9.95 for hosting 

Chargeback Fee: $15 for products ($15 for subscriptions and services where chargebacks exceed 2.5%)

Reserve: 10% held for six months 

To check out their website:



ProPay enables merchants to accept credit cards and other forms of payment. A ProPay account can be used by anyone with an Internet-connected computer.

Your credit card processing cannot exceed $250 per transaction, with a monthly sales limit of $1,000. If you need these limits raised, you can apply for an increase, but you will be required to maintain a reserve of at least $250.

You will need your own shopping cart or order form on your website.


Set-up Fee: $35 one-time payment 

Processing Fee: 3.5% 

Transaction Fee: 35 cents per transaction 

Chargeback Fee: $15

Withdrawing funds from your PayPro account also costs 35 cents per transaction. 

To check out their website:


As was stressed in The Nine Minute Tutorial when dealing with selecting a merchant account provider, please be very sure to read the contract for these services before signing up. Make certain you are fully aware of all the costs and terms that apply to the third party credit card processing service you choose.

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