Credit Card Processing without a Merchant Account

on Mar19
merchant account
Written by
James Davis
Written by James Davis
Senior Technical Writer at United Thinkers
Author of the Paylosophy blog, a veteran writer, and a stock analyst with extensive knowledge and experience in the financial services industry that allows me to cover the latest payment industry news, developments, and insights. Read more
merchant account
Reviewed by
Kathrine Pensatori
Product Specialist at United Thinkers
Product specialist with more than 10 years of experience in the Payment Processing Industry. I help payment facilitators and PSPs solve their various payment processing issues. Read more

“Is it possible to accept credit card payments without a merchant account?” Nowadays, this question and its variations can be often seen on different forums and online communities, especially those, dedicated to merchant services and online payment processing.

At some point, people who are using PayPal and similar platforms as means of accepting payments for their products and services start looking for alternative solutions. They often think that since they are not using a merchant account with PayPal (even the concept of “merchant account” is not used in PayPal terminology), they will be able to process credit card payments without having to open a merchant account. And that is why the question of card payment processing without a merchant account arises.

So can I do without a merchant account?

Unfortunately, the answer to the above-mentioned question is NO. In order to accept credit card payments you always have to get a merchant account.

Credit card processing is associated with certain risks, such as chargebacks, fraud, etc. In case of customer fraud and chargebacks, the merchant may turn out to be insolvent, so some entity has to assume the risk and financial liability it entails. That is why acquiring bank partnerships are important and essential (our respective article explains these matters in greater detail). A merchant, usually, gets funded within 48 hours from the time the payment is made (a week at most), but a chargeback can arrive within 60 days. So, in essence, a merchant account is a kind of a “loan” given to a prospective merchant by an acquiring bank.

But why do some people say that it IS possible to accept card payments without a merchant account?

Traditional way

Traditionally, if you wanted to accept credit card payments, you, usually, signed a contract with some acquirer using the services of an independent sales organization (ISO). The ISO either offered you a standalone terminal solution or directed you to some gateway provider for integration. Beside a contract with an ISO, you had to sign an agreement about getting a merchant account (the ISO provided you with a merchant account underwritten by some acquirer). We should stress that these were two distinctive steps to take.

PayPal and merchant accounts

However, as time went by, integration with a gateway and merchant account underwriting almost merged into a unified process. For instance you can open a PayPal account that allows you to accept payments inside PayPal network. If you want to accept credit card payments, PayPal upgrades your basic account. When this upgrade happens, you are asked to provide additional data for your profile. If you are in the US, for instance, these data will include your SSN or tax ID. The data is subsequently used for underwriting of your merchant account. The underwriting procedure includes verification of these data and verification of potential solvency of the applicant.

Although PayPal does not explicitly declare that a merchant account is created for the given business (even if the merchant account is not created physically, which is, technically, possible), PayPal conducts the same types of verifications that would be required to open a merchant account. Usually, people that are looking to process credit cards without a merchant account are either trying to avoid these verifications because of some background problems, or do not have some key data elements (SSN or tax ID) required to go through the verifications successfully.


You always have to get a merchant account in order to accept credit card payments. Even if you are working through some aggregator or payment facilitator (such as PayPal), it will be legally obligated to setup either a merchant or a sub-merchant account for you. In either case the same types of verifications on your account will be conducted and the same credentials (such as SSN and tax ID) will be requested from you.

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