Two ways to take cards: share an account, or get your own
Stripe works the same way and lists 2.9% + 30¢ online [5]. A payment facilitator signs you up under its own relationship with an acquiring bank. Visa describes the model this way: the facilitator signs the merchant contract on behalf of an acquirer and receives and distributes the sale proceeds to its sellers [3]. Square says it plainly in its terms: "Square is a payment facilitator" and "We are not a bank" [1].
A dedicated merchant account is a contract between your business and an acquiring bank, usually arranged through a processor or sales organization. The bank looks at your business before it approves you, and your sales settle under your own account.
| Payment facilitator (Square, Stripe) | Dedicated merchant account | |
|---|---|---|
| Signup | Minutes, mostly automated | An application and underwriting review |
| Whose account | The facilitator's, shared with other sellers [3] | Yours |
| Typical pricing | One published flat rate [4][5] | Interchange plus a negotiated markup |
| Holds and reserves | Allowed under the facilitator's terms [1] | Set in your contract, often at approval |
| Visa rules | Apply to you as if you contracted with the acquirer [2] | Apply to you directly |
Why shared accounts hold funds, and what the terms actually allow
When a facilitator approves you in minutes, it has not studied your business. It learns as you process. A sale that is much larger than your normal ticket, a jump in refunds or a chargeback can trigger a review, and the money waits while it happens.
Square's payment terms allow it to withhold funds "by temporarily suspending or delaying payouts of Proceeds" or to require a reserve, and the reserve "may be raised, reduced or removed at any time by Square, in its sole discretion" [1]. Other facilitators have similar terms. Read them before a big job lands, not after.
Before you take a large one-time payment
Tell the processor ahead of time if you can, especially if the sale is several times your usual size.
Keep the invoice, the signed estimate and proof of delivery. Those are what a review asks for.
Do not split one sale into several smaller charges to stay under the radar. Card rules treat that as a problem of its own.
A merchant account can also hold funds or require a reserve. The difference is timing: the bank sets most of those terms when it approves you, based on what it learned in underwriting, so fewer surprises show up later.
Pricing: one flat rate against interchange plus a markup
A flat rate charges the same percent on every card. That is easy to read, but it means a debit card from a large bank costs you as much as a premium rewards card. Visa's own table shows how far apart they really are: a regulated debit sale costs 0.05% + 21¢ (plus 1¢ for most banks), while basic credit in store is 1.51% + 10¢ and a Visa Signature Preferred card is 2.10% + 10¢ [6].
Interchange-plus pricing passes those card costs through and adds a markup you can see. If many customers use debit, the savings can be large, as the table at the top shows. If almost everyone uses premium credit cards, the gap narrows. Our flat rate vs interchange-plus calculator runs your own mix.
Smaller businesses can qualify for lower rows too. Visa publishes a Small Merchant program for businesses with $280,000 or less in Visa consumer credit sales, where basic credit in store is 1.29% + 10¢ [6]. A flat rate never shows you whether you would qualify.
When the card brands want a direct contract with you
Shared accounts are meant for smaller sellers. Square's terms note that if you take a lot of card payments, the card brands "might require that you also enter into an agreement directly with them, called a 'Commercial Entity Agreement'" [1]. Visa's guide to acceptance entities puts the sponsored merchant threshold at US $1,000,000 and refers to the Visa Rules for details [2].
Crossing that line does not mean you must leave Square or Stripe. It means the paperwork changes, and it is a good moment to price a dedicated account, because at that volume a few tenths of a percent is thousands of dollars a year.
What underwriting for a merchant account looks at
Expect the bank or processor to ask about what you sell, how customers pay, your average and largest sale, how far ahead you take payment before you deliver, and your refund and chargeback history. Recent processing statements help, because they show real numbers instead of estimates.
- Business details: legal name, tax ID, address, and how long you have been open.
- Owner details for anyone with a large ownership share.
- A voided check or bank letter for deposits.
- Three to six months of card statements, if you take cards today.
- Your website, refund policy and terms, if you sell online.
Underwriters also check whether a business was terminated by another processor. That list and the rules around it are covered on our high risk merchant account page.
Moving from Square or Stripe to your own account without a gap
Switching is mostly paperwork and timing. You can keep your facilitator account open while the new account is approved, and run both for a short overlap so no sale is missed.
- Pull your last three months of statements or payout reports. They show your real volume, average ticket and card mix.
- Ask for a written quote that lists the markup, every monthly fee and any early termination fee.
- Check whether your current terminals or online checkout work with the new processor. Buying a reader often costs less than a long lease; see card terminal leases.
- Move saved customer cards carefully. Stored card details need the customer's consent and a secure transfer, so ask both processors how they handle it.
- Leave the old account open until the first deposits from the new one land in your bank.
If the quote does not beat your current effective rate (total fees divided by total card sales) on your own statements, staying put is a fine answer.
Which one fits your business
Pros
- Facilitator: you are new, small or seasonal and need to take cards this week.
- Facilitator: your sales are small and steady, with few refunds or disputes.
- Facilitator: you value one simple rate over saving a fraction of a percent.
Cons
- Dedicated account: you process steady monthly volume and many customers pay by debit.
- Dedicated account: you take large or irregular tickets that keep triggering reviews.
- Dedicated account: you want reserve terms agreed up front instead of decided later.
BatchOut is our own processing service and offers dedicated merchant accounts. If we show it to you, it is labeled as ours and sits next to other options, including staying where you are.