Small Business Guide to Merchant Services 

What Merchant Services Include

A merchant services provider (MSP) connects your business to the card networks and banks so a customer’s payment turns into a deposit. The pieces usually look like this:

• Merchant account: the account your acquiring bank sets up so you can accept cards and receive settled funds. Here’s what to know before opening a merchant account.
• Payment gateway: the secure connection that sends online, phone and keyed payments for authorization. Some providers, like IntelliPay, own their gateway instead of reselling someone else’s. Learn more about choosing the right payment gateway.
• Point of sale: countertop terminals, mobile readers, tap to pay on a phone, or a full POS system with inventory and menu buttons.
• Card-not-present tools: a virtual terminal, online checkout, invoices, and text-to-pay or email-to-pay links.
• ACH/eCheck: bank-to-bank payments, useful for larger invoices where card fees add up. See the business owner’s guide to ACH payments.
• Reporting and funding: deposit timing, batch reports, chargeback notices and, for multi-location businesses, parent/child reporting.

What it looks like in practice

Our bakery needs a fast countertop terminal with tap and wallets for the morning rush, a way to take a cake deposit over the phone without writing card numbers on an order slip, and an invoice or pay link for catering clients. It doesn’t need a restaurant POS with table management. Paying for features you won’t use is one of the most common ways small businesses overspend.

Merchant Account vs. Payment Facilitator

There are two main ways to get set up. Neither is wrong. They fit different stages of a business.

For the bakery: a facilitator is a reasonable way to start at a farmers market. Once the shop is open, doing steady volume and taking big catering orders, a dedicated merchant account usually costs less and avoids a surprise hold on a $2,000 wedding order right when you need to buy supplies. If you’ve had funds held before, here’s why processors hold funds and set reserves.

How Pricing Works and Why Small Tickets Hurt

Every card fee has three layers:

• Interchange: paid to the card-issuing bank. Set by Visa and Mastercard, it varies by card type and how the card is taken. This is the biggest piece. Visa publishes its current U.S. interchange rates, and we break them down in interchange fees explained.
• Assessments: small network fees.
• Processor markup: the only part you can really negotiate.

Put together, most small businesses pay roughly 1.5% to 3.5% per card sale. Visa and Mastercard transactions averaged about 2.35% in 2024, according to the Nilson Report as cited by Payments Dive.

The three pricing models

• Flat rate: one percentage plus a fixed fee on every sale. Easy to read, rarely the cheapest once you have steady volume.
• Tiered: the processor sorts sales into “qualified,” “mid-qualified” and “non-qualified” buckets. The processor sets the rules for each bucket, which makes it the hardest model to audit.
• Interchange-plus: you pay the actual interchange and assessments plus a disclosed markup. The most transparent model and usually the best fit for an established business.

The fixed fee is the bakery’s real problem

Using an example flat rate of 2.6% plus 15¢ per tap, here’s what the same pricing does to different tickets:

If most of your sales are under $10, ask about the per-transaction fee before you ask about the percentage. Also ask whether your processor passes through small-ticket interchange and regulated debit pricing. Debit cards from large banks are capped under the Federal Reserve’s Regulation II at 21¢ plus 0.05% (plus a 1¢ fraud adjustment). A federal court vacated that rule in 2025 but stayed its own ruling while the Fed appeals, so the cap still applies for now, according to PaymentReview. Here’s more on signature debit vs. PIN debit.

Find your effective rate: total fees on last month’s statement divided by total card volume. If you can’t figure out what you paid from the statement, that’s a finding on its own. Our guide on how to read your merchant statement shows where to look, and how to lower credit card processing fees covers what to do next.

Surcharging and Cash Discount Rules in 2026

Passing some or all of your card cost to customers is legal in most of the country, but the details matter and they change. For a full breakdown, read passing card fees to customers in 2026.

Recargo

• Credit cards only. Never debit or prepaid, even when the customer chooses “credit.”
• Under Visa’s surcharging rules, capped at the lower of your actual cost of acceptance or 3%.
• Must be disclosed before the sale and shown as a separate line on the receipt. The card networks also require advance notice through your processor.
• Banned outright in Connecticut, Massachusetts, Puerto Rico and Maine. Colorado and Oklahoma cap it lower, and New York’s law requires you to post the total card price, not just a sign saying a fee applies.

Most surcharge problems come from small setup mistakes. We cover the common ones in surcharge compliance mistakes and fines.

Cash discount and dual pricing

Instead of adding a fee, you post the card price and give a discount for cash. It’s treated differently than surcharging in most states, but a program that’s called a cash discount and works like a surcharge is still a surcharge. Your pricing, signs and receipts all have to match. Our dual pricing FAQs answer the most common questions.

Should the bakery do it?

Maybe not at the counter. A 3% fee on a $4 cookie is 12¢ and can feel petty to a regular. It often makes more sense on large orders, like catering and custom cakes, or you can build card costs into menu prices and skip the fee conversation. Run your numbers and check your state before you print any signs.

What the Visa and Mastercard Settlement Means for You

In June 2026, a federal judge in Brooklyn gave preliminary approval to a revised $38 billion settlement between Visa, Mastercard and about 12 million merchants, as reported by Reuters. As proposed, it would:

• Lower credit interchange rates by 10 basis points (0.10%) for five years
• Cap the rate on standard consumer credit cards at 1.25% for eight years
• Give merchants more room to surcharge or discount by card type
• Let merchants decline some higher-cost premium and commercial cards, a break from the old “honor all cards” rule

Final approval still has to come after a notice and comment period, and at least one trade group has said it will appeal, according to Payments Dive. Two practical points: interchange savings only reach you if your pricing passes them through (interchange-plus does, flat rate usually doesn’t), and turning away a customer’s rewards card at a bakery counter is rarely worth it. We track the rest of this year’s changes in surcharge and interchange fee legislation for 2026.

Security, PCI and Fraud

PCI DSS is not optional

Every business that accepts cards has to follow the PCI Data Security Standard. Version 4.0.1 is current, and its future-dated requirements became mandatory on March 31, 2025. Most small merchants validate each year with a Self-Assessment Questionnaire (SAQ). Which one you use depends on how card data moves through your business, and the less card data you touch, the shorter it gets. Our PCI DSS 4.0.1 guide explains it in plain terms.

• Use terminals with point-to-point encryption and tokenization so card numbers never sit on your systems.
• Take phone orders in a secure virtual terminal or send a pay link. Never write card numbers down on order tickets or keep them in a notebook for “later.”
• Give each employee their own login and don’t share the admin password.
• Check your terminals for tampering and use your provider’s PCI portal instead of guessing.

Fraud and chargebacks

Card-present fraud at a bakery counter is low when you tap or dip chips. The risk is in phone and online orders. Watch for:

• A large first-time order that asks you to pay a “delivery driver” or refund the difference to another card
• Rush pickups by someone other than the cardholder
• Several cards tried back to back until one works, a pattern known as card testing

Use address verification (AVS) and CVV on keyed sales, 3-D Secure for online checkout, and written cancellation and deposit terms that customers accept before you start baking. Those terms are your best evidence if a customer disputes a $300 cake after it’s been picked up. Here’s how tougher chargeback rules affect small businesses.

How to Choose a Provider

Bring last month’s processing statement to every conversation and ask each provider to quote against it. Then work through these:

Questions to ask before you sign

1. Pricing: Is it interchange-plus? What’s the markup and the per-transaction fee? What monthly, PCI, statement or batch fees apply?
2. Contract: How long is it? Is there an early termination fee or a liquidated damages clause? Does it auto-renew?
3. Equipment: Do I own it, rent it or lease it? Will it work with another processor if I leave? Equipment leases are often non-cancellable and cost far more than the hardware.
4. Funding: When do deposits hit my account? Is next-day funding available, and at what cost?
5. Fit: Does it handle counter, phone, online and invoice payments in one place? Does it integrate with my POS and accounting software?
6. Support: Can I reach a real person, in the U.S., on a Saturday morning when the terminal goes down?
7. Security: Is the provider PCI DSS Level 1 compliant? Do you offer encryption and tokenization? Will you help with my SAQ?
8. Surcharging or cash discount: If I want a program, will you set it up compliantly for my state and handle network notification?

Red flags

• “Zero fees forever” with no explanation of how the program complies with state law
• A quote that only shows the percentage and never mentions the per-transaction fee
• Pressure to sign an equipment lease the same day
• Tiered pricing with no written definition of “qualified”

For more on what often gets missed, read merchant services: what you don’t know could hurt your business, or see how IntelliPay works with small businesses.

Preguntas frecuentes

What are merchant services?

The accounts, technology and support a business needs to accept card, wallet and ACH payments: a merchant account, gateway, card terminals or POS, reporting, fraud tools and funding to your bank.

What does a small business typically pay to accept credit cards?

Usually about 1.5% to 3.5% per sale, all in. Divide total monthly fees by total card volume to get your effective rate. Our guide on how to read your merchant statement walks through it.

Why are card fees so high for a bakery or coffee shop?

The fixed per-transaction fee. A 15¢ fee is 2.5% of a $6 pastry on its own, before the percentage is added.

Is interchange-plus pricing better than flat-rate pricing?

For most established businesses, yes. You see the real card cost and the markup separately, and you benefit when interchange drops. Flat rate is fine for very new or very low-volume businesses.

What is the difference between a merchant account and a payment facilitator like Stripe or Square?

A merchant account is set up in your name with an acquiring bank. Stripe and Square are payment facilitators, so you’re a sub-merchant under their account. Facilitators are faster to start, but you get less pricing flexibility and a higher chance of a frozen account.

Is credit card surcharging legal?

In most states, yes, with rules. It’s banned in Connecticut, Maine, Massachusetts and Puerto Rico. It’s credit only, never debit, and under Visa’s surcharging rules can’t exceed your cost or 3%, whichever is lower.

What is the difference between surcharging and a cash discount program?

A surcharge adds a fee for paying by credit card. A cash discount posts the card price and discounts cash. If it works like a surcharge, it’s treated like one. See our dual pricing FAQs for more.

Does the Visa and Mastercard settlement lower my fees?

It could once it’s final. The June 2026 preliminary approval covers a 10 basis point cut for five years and a 1.25% cap on standard consumer cards for eight years. Final approval is still pending.

Do small businesses need to be PCI compliant?

Yes. Most validate with an annual SAQ. Encrypted, tokenized payment tools are the easiest way to keep that work small. Our PCI DSS 4.0.1 guide covers the details.

Lectura sugerida

• Interchange Fees Explained: What They Are, Who Sets Them and How Merchants Lower Cost
• Cómo leer su extracto de comerciante
• How to Lower Credit Card Processing Fees and Increase Margins
• Passing Card Fees to Customers in 2026: Surcharging, Dual Pricing and Convenience Fees Explained
• Surcharge Compliance Mistakes and Fines
• Opening a Merchant Account: What You Should Know
• My Payment Processor Froze My Account. Now What?
• Merchant Guide: PCI DSS 4.0.1 Made Simple
• Card Testing Fraud: Small Purchases, Big Losses
• Tendencias de fraude con tarjetas de débito en 2026: Una guía de supervivencia para pequeñas empresas

Fuentes

• Payments Dive, Court approves Visa-Mastercard settlement (June 9, 2026)
• Reuters, Visa, Mastercard $38 billion swipe fee settlement wins US judge’s approval (June 2026)
• Visa, Merchant Surcharging Q&A
• Visa, Visa USA Interchange Reimbursement Fees (April 2026)
• Maine Legislature, 9-A M.R.S. §8-509, Credit card and debit card surcharge prohibition
• New York State Senate, General Business Law §518
• Federal Reserve, Regulation II (Debit Card Interchange Fees and Routing)
• PaymentReview, Debit interchange cap status, 2026
• PCI Security Standards Council, SAQs for PCI DSS v4.0.1