Merchant Account vs. Stripe Payments

If you are considering getting your business a merchant account, or just giving it the capability to handle credit card payments, you’re making a good choice. Stepping into the modern age is the best way to move forward. If you have done your research, you already know the benefits of processing credit cards, as well as the risks involved in the process. If you didn’t know, here are the basics of Stripe and Merchant Accounts.

Merchant Accounts Explained

Merchant accounts are dedicated accounts that serve as a holding area for all funds processed using a customer’s credit card at your business. The money is held here and later transferred to your bank account on request. These accounts work with payment gateways to give you a smooth credit card acceptance experience as your business progresses and advances.

What is Stripe?

Stripe is what is called a processing aggregator. It functions in pretty much the same basic way as a merchant account does. It is relatively new, is free to sign up for, and fun to use for the individual or the small business.

If you’re considering accepting credit card payments at your store, you need to know some of the fundamental differences between real merchant accounts and Stripe. Both of them have their own advantages and disadvantages, so the choice is a tough one unless you know exactly what your business needs.

The Differences Between Stripe and Merchant Accounts

Let’s start off by saying that there is no way you can generalize all merchant accounts, but they all share key components.  Stripe is a company that allows you to accept payments by credit card and debit card. However, these are only possible online or using a mobile payment device. You can’t accept cards that are physically swiped at your store at a point of sales terminal.

This means that your processing fees will be higher for each transaction because of the higher security risk posed by an online payment. Merchant accounts, depending on the provider, are typically able to accept all forms of payment. These can be physical, online or using mobile payments.

Pricing Models are Different Too!

When it comes to actual payments, Stripe has a very simple payment plan. It costs you 2.9% plus 30 cents for every transaction that is requested online or using mobile. This rate is fixed and will not fluctuate with your sales volume or the purchase amount. As a new business owner, this can be critical when evaluating your payment processing needs. While most merchant accounts may not be nearly as beneficial to you at the onset of the service, when your sales start to increase the 2.9% charge from Stripe is going to set you back a little more than before.

While most merchant accounts may not be nearly as beneficial to you at the onset of the service, when your sales start to increase the 2.9% charge from Stripe is going to have an effect on your bottom line.

This cost will only increase with time. With most merchant accounts, the pricing model is tiered. This means that as your sales volume and transaction amount increases, your costs tend to decrease as you hit certain tiers of payment. This could save you a lot of money as your business grows and becomes more successful.

If there is one area where Stripe excels it is flexibility and ease of use. As an aggregator, the company doesn’t have nearly as grueling an application process as a merchant account does. It is very easy to apply to and get accepted.

In conclusion, both merchant accounts, and Stripe have unique features  Some might find it way more beneficial to use Stripe, especially with eCommerce on the rise. Others prefer the support, security, and customization of a traditional merchant services account. Educating yourself on the variety of payment processing services is the first step in choosing what works for your business.