Merchant Services: Everything You Need to Know


Back to all posts

Despite the arrival of mobile payments, consumers still favor using credit and debit cards to make payments both in-store and online. However, their share of the market is expected to drop to 46% by 2019, as mobile wallets, mobile payments and NFC technology become more popular.

According to the most recent Federal Reserve Payments Study, total card payments grew from 103.5 billion with a value of $5.65 trillion in 2015 to 111.1 billion with a value of $5.98 trillion in 2016. Within these figures, credit card payments had the highest growth rate at 10.2%, which is an increase from 8.1% reflective between 2012 to 2015. Debit card payments registered the second highest growth rate of 6%, but this is down from 7.2%, reflective between 2012 to 2015.

This detailed guide will help you understand exactly what is meant by ‘merchant services,’ why the figures above are important to your business, and why you should be diligent on keeping up to date with industry statistics as they fluctuate year on year.

Merchant Services - illustration showing growth of retail debit card payments by 6.8% annually and credit card payments at a rate of 7.4% annually.

What are Merchant Services?

In short, merchant services allow your business to accept card payments from your customers. This is otherwise known as credit card payment processing. Our CardPointe platform was built to address all of your payment processing needs.

When a customer makes a payment for goods or services, this transaction undergoes a chain of approval so the payment can be accepted.

The customer’s credit card information is sent to the merchant’s acquiring bank, which is then sent to a payment processor. Next, the card association (MasterCard, Visa, Discover, AMEX) sends this information to the issuing bank (this is the bank where the credit card was initially issued). This is where the approval, or denial, of payment happens. The issuing bank then sends a code to the credit card association, who sends it to the merchant’s acquiring bank, and finally onto the merchant’s payment terminal. Once the transaction is completed, the merchant’s terminal then prints a receipt. The customer will then pay their credit card bill at the end of the billing period.

Merchant Services - clothing retailer behind counter receiving credit card from customer.

What is a merchant account?

Put simply, a merchant account allows businesses to accept credit and debit card payments.

To open a merchant account, a contractual agreement is made between the merchant and the acquiring bank (who will be processing the card payments) and any other parties involved in processing payments, such as a payment processor, an independent sales organization (ISO), and a member service provider (MSP).

What are merchant account fees?

It is important to understand the various types of fees when considering a merchant account. Typically these fees are determined by the way your business operates; the size of your company, credit score, potential risk factors and whether you have a history with any other merchant services. Businesses can expect to pay transaction fees which are calculated by the actual transaction amount and a flat fee (this can vary depending on your merchant services provider), minimum fees which are applied monthly, and gateway fees which are only charged if the merchant services provider uses a third party payment processor.

What are interchange fees?

Understanding the importance of interchange fees, what they mean, and how they relate to your business is crucial for businesses considering a merchant account. Also known as interchange rates or pricing, these fees are charged to the merchant by a credit card processor (such as CardConnect), and must be paid in order for the merchant to accept credit card payments. These rates are set by the card associations and card-issuing banks.

Interchange fees are determined by the type of merchant you are, how big or small your company is and how your company accepts payments.

To find out more about interchange rates and pricing, click here to listen to a podcast from Angelo Grecco, our Chief Business Development Officer, and George Peabody from Glenbrooks’ Payments on Fire, who discuss at length the importance of interchange fees.

What is Interchange Optimization?

There are hundreds of interchange cost structures available, which is where interchange optimization can really help your business find the best rates available to maximize on credit card processing savings. Interchange optimization is based on industry-specific program requirements created by the major card brands (MasterCard, Visa, AMEX), and ensure that your business qualifies for the best interchange rates in every transaction that you process.

Merchant Services - illustration of lines connected to $ signs representing interchange optimization.

How do I know that the card payments I accept are secure?

The Payment Card Industry (PCI) Security Standards Council enforces a set of standards called the PCI Data Security Standards. These standards make sure that all customer and credit card information is securely handled, lessening the impacts of a data breach.

CardConnect’s devices are protected by CardSecure, which is a combination of point-to-point encryption (P2PE) and our patented tokenization. This ensures that your customers’ payment data is instantly protected at the point of entry, ensuring secure transmission for processing. Using patented, intelligent tokenization, CardPointe reduces the challenges they encounter with PCI compliance for all transactions – both card-present and card-not-present. Only P2PE certified vendors like CardConnect can deliver this unparalleled level of payment security.

Merchant Services - Illustration of female presenting information on a device with to two male individuals representing secure card payments.



1) Are merchant services right for my business?

Merchant services can really help your business grow and control costs. Engaging a payment processor that uses their own products and technology is more likely to be cost effective. Fraud prevention and data security are as paramount online as they are in-store. Choosing a merchant provider that specializes in eCommerce, for example, will ensure that you can securely accept payments from all major credit cards, as well processing popular virtual payment types, such as Apple Pay.

The best merchant services can transform how your business manages transactions, saving you both time and money, allowing you to focus on other areas of your business.

2) Will I be approved for a merchant account?

This will depend on your type of business, and whether the credit card networks have assigned you any risk factors. You may experience a longer application process, or be required to pay higher fees for transactions with a bigger risk factor.

3) How much will it cost to have a merchant account?

The cost of accepting credit card payments can vary. It’s important to note what fees will be assessed for your company, which will be laid out in the initial contract. The fees you are responsible for will include both interchange rates and processing fees. Depending on the payment processor you choose, there may be room to negotiate a better, or lower rate for your business.

4) How long will it take before I'm up and running?

The setup process is dependent on different variables of a business, like size and card acceptance method. Larger more established businesses that require multiple POS systems in multiple locations, for example, could experience a more extensive setup.

5) What type of POS do I need?

The type of terminal you need will depend on the type of payment method your business will be accepting. If you are based in a single location, a POS terminal may be the best option, however, if you are on the move, then a virtual terminal or mobile device that works with an integrated app, for example, would be a better option.

Why choose CardConnect as your merchant services provider?

Founded in 2006, CardConnect is one of the 10 largest independent sales organizations (ISOs) of First Data Merchant Services, the world’s largest electronic payment processor.

CardConnect is a leading provider of payment processing and technology services, helping more than 67,000 merchants across the U.S., from Fortune 500 to small startups, accept billions of dollars in card transactions every year.

CardConnect’s mission is to provide simple and secure payment processing solutions. Using CardSecure, our patented tokenization, gateway and hardware solutions, we make payment acceptance simple, integrated and secure.

Looking for more information?

Fill out the form below and we'll connect with you.


Thanks for your interest!
We will be in touch soon.