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Merchant Services: What They Are and How to Choose

Rasika Lakshan ·

Last updated:

This is general information, not legal or tax advice.

Merchant services is the umbrella term for what a business needs to take card payments. This guide explains the pieces, who sells them, how pricing and contracts differ, and how to compare providers using published information. It is general information, not financial or legal advice.

What merchant services include

Most setups combine four things: a way to take the card (a reader, a POS system or an online checkout), a way to process it (a processor or payment service), a way to receive the money (a bank account), and support when something goes wrong, such as a dispute. Some providers sell all four together; others sell one piece.

Who sells them

You will meet payment processors, POS companies, ecommerce platforms and banks. Their pages describe themselves differently. Toast’s pricing page says it “is not a payment card processor, but it is a payment facilitator that partners with processors to offer card processing services.” That detail matters because it affects whose agreement you sign and who sets the terms. Compare the providers we cover on Best credit card processing for small business.

How merchant services are priced

Pricing usually comes in two shapes. Flat-rate pricing charges one percentage plus a fixed fee per sale, as on the Square and Stripe pages. Interchange-based pricing passes through the card network’s cost and adds a markup or a subscription, as Stax describes with “0% markup on direct-cost interchange.” Our guide to interchange-plus vs flat rate explains when each can be cheaper.

On top of the rate, look for monthly plan fees, hardware, dispute fees, fees for keyed-in or international cards, and faster payouts. Each provider we cover lists these differently.

Contracts and cancellation

Terms vary widely. Square’s pricing page says “No hidden fees or locked-in contracts. Cancel or switch anytime.” Stax lists “No cancellation fees (long term contracts).” Clover says subscriptions are non-cancelable and ineligible for refunds, and a quick-service offer footnote requires a 3-year contract. Read the agreement before you sign, whichever provider you pick.

How to choose

  1. Estimate your monthly card sales and average sale, and how much is in person, online and keyed in.
  2. Compare the effective rate with our processing fee calculator.
  3. Check the limitations we list for each provider on the comparison pages.
  4. Ask for the agreement and a written quote when a provider does not publish its rates.

State pages we publish

A state page is published only when its sales tax rate, LLC formation fee and surcharge rule are all verified from official sources. States without a page are not hidden: the table says what is missing.

State pages and what is missing

StateSales taxLLC feeSurcharge ruleWhy no page
AlabamaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
AlaskaMissingVerifiedMissingno state sales tax rate to show; surcharge status not verified from a statute or official source
ArizonaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
ArkansasVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
CaliforniaVerifiedVerifiedVerifiedPage published
ColoradoVerifiedVerifiedVerifiedPage published
ConnecticutVerifiedVerifiedVerifiedPage published
DelawareMissingVerifiedMissingno state sales tax rate to show; surcharge status not verified from a statute or official source
District of ColumbiaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
FloridaVerifiedVerifiedVerifiedPage published
GeorgiaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
HawaiiVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
IdahoVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
IllinoisVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
IndianaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
IowaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
KansasVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
KentuckyVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
LouisianaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
MaineVerifiedVerifiedVerifiedPage published
MarylandVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
MassachusettsVerifiedVerifiedMissingsurcharge rule known only from Visa, not from the statute
MichiganVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
MinnesotaVerifiedVerifiedVerifiedPage published
MississippiVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
MissouriVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
MontanaMissingVerifiedMissingno state sales tax rate to show; surcharge status not verified from a statute or official source
NebraskaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
NevadaVerifiedMissingMissingLLC formation fee not verified; surcharge status not verified from a statute or official source
New HampshireMissingVerifiedMissingno state sales tax rate to show; surcharge status not verified from a statute or official source
New JerseyVerifiedVerifiedVerifiedPage published
New MexicoVerifiedMissingMissingLLC formation fee not verified; surcharge status not verified from a statute or official source
New YorkVerifiedVerifiedVerifiedPage published
North CarolinaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
North DakotaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
OhioVerifiedMissingMissingLLC formation fee not verified; surcharge status not verified from a statute or official source
OklahomaVerifiedVerifiedVerifiedPage published
OregonMissingVerifiedMissingno state sales tax rate to show; surcharge status not verified from a statute or official source
PennsylvaniaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
Rhode IslandVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
South CarolinaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
South DakotaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
TennesseeVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
TexasVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
UtahVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
VermontVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
VirginiaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
WashingtonVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
West VirginiaVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
WisconsinVerifiedVerifiedMissingsurcharge status not verified from a statute or official source
WyomingVerifiedVerifiedMissingsurcharge status not verified from a statute or official source

Frequently asked questions

What are merchant services?

Merchant services are the products and services a business uses to accept card and other electronic payments: processing, a gateway for online payments, card readers or a POS system, and support. Providers package them differently.

Who provides merchant services?

Payment processors, POS companies and ecommerce platforms. Toast's page, for example, says it is not a payment card processor but a payment facilitator that partners with processors.

How are merchant services priced?

Usually a percentage plus a fixed fee per transaction (flat rate), or interchange plus a markup, sometimes with a monthly subscription. Our guide explains the difference.

Do I need a long-term contract?

Not always. Square says it has no locked-in contracts, Stax lists no cancellation fees, and Clover says its subscriptions are non-cancelable. Always read the agreement.

How do I compare providers?

Compare the effective rate at your volume and average sale, plus plan fees, dispute fees, contract terms and support. Use our calculator and comparisons.

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Sources