Why do you need merchant services? The answer is simple. If you sell goods and services at the store, at the convention or show, over the phone or online and if you want to accept credit and debit cards, such as Visa, MasterCard, and Interac Debit, then you need merchant services in order to process those cards.Processing companies in Canada open merchant accounts and process transactions for you. Those are Moneris,Global Payments, Chase Paymentech,TD Merchant Services,Elavon, and First Data. Everybody else is a reseller.

Processing companies will not only open a merchant account for you but will also provide you with means of accepting credit cards. Through a point of sale terminal (aka POS terminal), a manual imprinter, a virtual terminal, or a gateway for your e-commerce website. After being setup, you can start processing credit and debit cards by swiping (magnetic strip), tapping (PayPass or PayWave), or dipping (chip entry) them on your POS terminal. Mind you that as of 2013, all terminals in Canada must be EMV compliant and accept chip cards and PIN. If somebody is trying to sell you a terminal,always ask this question, otherwise, the banks may hold you responsible for fraudulent transactions passed through your non-chip ready terminal. The terminal is encrypted with your unique Merchant ID (MID), Terminal ID (TID) and knows where to send the transactions. The funds are usually deposited into your bank account the following business day. It does not matter what bank or credit union you are with. All the major processing companies mentioned here work with all of them.


All the costs of setting up the merchant account and processing credit and debit cards can be divided into two large classes — fixed costs and variable costs. Fixed costs are those that you will pay every month without change. Those include one-time set-up fees anywhere from $50 to $150, monthly administration fees $5 to $10, minimum charges $10 to $20, and monthly terminal rental or lease.

I would like to get into more details on minimum charges and terminal fees. Monthly minimums will apply to you if you do not process enough transactions every month to satisfy $10 or $20 minimum. It is an important consideration,especially if you are only starting your business and your processing volumes are not high. If your credit card fees (that we will touch on a bit later) will not reach $10 or $20 (depending on the processing company), then you will be charged that minimum fee. Some companies go even further and implement $10 minimum on Visa and a separate $10 minimum on MasterCard. So, say your Visa charges have exceeded $10 but MasterCard have not, then you will be charged a minimum of $10 on MasterCard. If both of your Visa and MasterCard charges fail to meet the minimum threshold, you may be hit with $10 twice = $20.

Now about POS terminal charges. POS terminals come in all sorts of shapes and forms — desktop ones that plug into the internet or phone line, cordless ones to pay at the table (just like home cordless phone, they have a base and the handheld terminal that can be taken off the base and carried around a limited distance — usually 200 feet), and truly mobile ones for deliveries that work off a cellular network (usually Rogers).

Desktop ones are the cheapest and the most popular of them all. They run anywhere from $600 to $800 to buy and from $25 to $35 monthly rental. Most modern terminals already come with PayPass and PayWave tap capabilities but older cheaper ones don’t. So ask the right questions when you get them. They all have a thermal printer in them for printing receipts, a screen to see amount of transaction and prompt buyers to choose between chequing and saving accounts, and a keypad to enter their PIN. They all have a magnetic stripe reader and, as of 2013, must have chip functionality. There are many cheap options on eBay from the States. If you buy one though for a few hundred bucks, you will end up with an expensive paperweight for two reasons: (1) just like a mobile phone that is locked to certain provider, POS terminals are encryption devices and are also locked. They require a contract and key injection of encryption keys and codes
to work.

Nobody in its righteous mind will entertain your plea to make the terminal work due to risk of fraud; (2) none of US POS terminals comply with Canadian-specific EMV requirements for chip cards and none are Interac-certified. No processing company in Canada can legally put them into operation. The cordless ones to pay at the table (also called Bluetooth or short-range wireless terminals) consist of a base that connects to an internet or a phone line and
the terminal itself that connects to the base via Bluetooth connection. You can have multiple cordless terminals work off one base. The initial pair (the base with the cordless terminal) can set you back $45-$65 monthly. The purchase price is way over a $1000. Additional terminals (without the base) can be had for around $40 a month. We get lots of questions if they can connect to the internet via Wi-Fi or a wireless router. The quick answer is no Wi-Fi because transmission of codes and sensitive customer and financial data over the air poses a risk to data security. Remember that a POS terminal is an encryption machine, like an ancient Enigma. A base though could be connected to a router but via internet LAN cable.

The mobile terminal for deliveries (also called long-range wireless) looks exactly the same as the usual terminal but does not require wires to operate. It has a SIM card on board and can connects through the cellular network. It has a rechargeable battery on board that should last you a day and it will work anywhere where there is cell phone reception. Mind you that if you want to use it at the show or convention, some shows limit cell phone use or install signal blockers in order to sell their land line or internet connection for extra money if you have a booth there. Mobile terminals are most expensive. They will set you back $60 a month and more.Some companies also charge $20 extra a month for wireless data plans. Many require $100 one time activation fee for mobile units. Buying it will set you back around $2000.

Manual imprinter is the cheapest of all the terminals ($30 and you own it) and probably the simplest to operate. It does not require electricity, neither it requires a phone or an internet connection. It works like this — you put a credit card on it, cover it with provided receipt paper and manually imprint the raised numbers onto the receipt paper by moving the press handle. The downside of a manual imprinter is that you cannot take Interac debit, only credit cards because there is no place to input PIN that is required for debit. Another downside is that you will have to call in every transaction on 1-800 number and key in every transaction manually on the phone keypad. You can do it in front of a customer or wait until the end of the day and run the whole batch of them in one sitting.

Virtual Terminal is convenient because you don’t need a physical terminal — your computer or a smart phone with internet connection becomes one. Virtual Terminal looks exactly the same as an online payment page where you key in client’s credit card information and amount. You can have also have a card reader attached to your Android or Apple iPhone and swipe the cards this way. The card reader is cheap — just $30 to buy. Virtual Terminal will cost you $30 a month and some setup fees $50 to $150 one time. Some companies charge higher one-time setup fees and lower monthly charges, say $10 a month because of it. Same Virtual Terminal can work as payment page of your eCommerce website but site must be compliant with payment processing requirements first.


You can buy, rent, or lease to own a POS terminal. The difference is huge, so you should take time to consider this seriously. When you rent a terminal, you don’t own it — the processing company does. If there are any upgrades, additions, or replacements to the terminal due to technical or legal requirements, the processing company will do that free of charge. Also, if a button pops out or screen goes black at not your fault, you can usually replace the terminal within a day or two. They will just ship you a new one and take the old one back. When you lease a terminal, you have an option to buy it back in the end and own it so you are not throwing the money away on rental with no owning option in the end. It is like renting a house or having a mortgage on a house. There is usually a one year warranty on the terminal but after it expires, you are solely responsible for maintaining the machine. If something goes wrong with it — you will be stuck with it or will have to pay out of pocket to repair or replace it. Unlike with rental, if you would want to cancel the lease agreement, it is not uncommon to see the leasing company charge you the loss of revenue until the end of the contract, which could be in the thousands of dollars.

If you buy a terminal outright, you are stuck with it also. Though you may save in the long run but if you wish to change providers down the road or upgrade your equipment, you will be stuck with your terminal because no other processing company will touch it besides the original one who provided you with it.


The fixed charges described earlier (such as terminal charges) are easy to comprehend. The variable charges, on the other hand, such as credit card charges, are a bit more tricky. All the different credit cards ever issued by banks in the history of mankind are priced differently. In the U.S., it is a mess — their payment processing agreements come with pages and pages of credit card costs listing all of them in small print for full disclosure. In Canada, the approach is a bit more structured — all credit cards are grouped into two large categories — Qualified (also called Discount rate — nothing to do with a discount though) and Non-Qualified. Qualified cards are those that are swiped, tapped, or dipped (chip cards inserted) AND do not have points on them or cash back rewards. Non-Qualified cards are those that are not swiped, tapped, or dipped (key-entered, for example) OR those premium cards that have points or cash back on them, such as Visa Infinite or MasterCard High Spend or Premium High Spend cards, corporate and commercial cards. Those costs are set centrally by VISA/MC and are published regularly online (Google Visa Interchange Canada or MasterCard Interchange Canada).

The minimum you would pay is 1.54% for Visa and 1.59% for MasterCard. Those companies that promote lower rates are not quite forthcoming by doing so. Either they forget to tell you that those lower rates are Emerging Markets rates (for colleges, gas stations, and grocery stores or companies with billions in revenue (the Walmarts of the world)), or they make up their money somewhere else (i.e. by hiking Non-Qualified rates, adding other monthly hidden fees, or hiking up the introductory rate 3 months later because “you don’t meet the high processing volume criteria”). So if the advertised rate is below those numbers (meaning below the cost set by VISA/MC), be very weary (what else they are not telling you, what other hidden costs are there)? The maximum cost you would pay on Non-Qualified card is 2.65% for MasterCard and 2.00% on Visa. Mind you, I said COST. Processing companies need to make money, so they put their markup on the cost. There are also assessment fees or, as they are also called, card brand fees, that are within 0.10% that are imposed by their respective card brands (Visa and MasterCard) and there is no way avoiding them. Processing companies may also impose a per transaction charge of 5-10-25 cents in addition to the percentage. Per transaction charges are mandatory for many keyed-in transactions, such as over the phone and online. All in all, on average, you would expect paying around 2-3%.


There are so many different fees — terminal rental, admin fee, account fee, settlement charges, batch fees, per transaction charges, assessment fees, qualified rates, discount rates (nothing to do with a discount), non-qualified, statement fees, PCI compliance charges… How to make sense of it all? Well, to be honest with you, you don’t have to make sense of it all. What really matters is your Effective Rate — the rate they really charge you. Few processing companies mention it on their statements. If your processor is not one of those few who do share and make merchants’ life easier, you can still determine it on your own with a use of calculator and some simple math. Take your processing statement, locate your total processing volume for that month for Visa and for MasterCard (exclude Interac debit as it is priced differently and stands apart). Add Visa and MasterCard processing volume for the month. Example — Visa $8500, MasterCard $6340 processed for the month. You add them up and get $14840 — this is your total processing volume on credit cards for the month.
Then you locate the total fees and charges you paid them. Normally, either on the first or last page of your statement. Say, it was $324.50 for the month. You divide the total charges $324.50 by your processing volume on credit cards $14840 and multiply by 100 to get a percentage. In our example, the Effective Rate would be 324.50 / 14840 x 100 = 2.18%. If you want to dig deeper and have a more detailed analysis and comparison with competitive rates, it is a good idea to send your processing statement to competition and let them assess it. Many have software in place where they will plug in the numbers from the statement and the software will generate a detailed report comparing rates and showing the savings, if any, to be had and putting dollar value on the savings, too. These reports are very illustrative and help enormously with decision making to choose the right processing company — so I highly recommend it.


There are only a few processing companies in Canada. Those are Moneris, Global Payments, Chase Paymentech, TD Merchant Services, Elavon, and First Data. Everybody else is a reseller. The costs for everyone are the same as they are set centrally by Visa and MasterCard. The rates you will encounter though are all over the map, depending on who you deal with. All the processing companies base their quotations on your processing volumes and potential risk of fraud (some businesses are more prone to risk than others). In other words, if you are a small company or just starting out, do not expect your rates to be close to cost. They will be relatively high. The benefit of dealing with a smaller company or a reseller is that they are not governed by strict processing volumes guidelines and can give you any price they want without reservation. You will have more personalized attention from a smaller company than from a large one. Resellers take their time to make their case and educate the merchants as it is the only way they can win business. Also their rates are very competitive as it is a competitive playground.

Educate yourself.


The Government of Canada has recently adopted Code of Conduct (also known in the industry as CG10) to somewhat regulate the merchant services industry. CG10 covers many aspects of the payment processing industry but, for the merchant, it is good for two things:

1. Mandatory disclosure of all the fees.

2. Cancel contract without penalty.

Below are some excerpts from CG10:

Code of Conduct for the Credit and Debit Card Industry in Canada. Increased Disclosure in Sales and Business Practices and Cancellation of Contracts without Penalty.

Relevant Elements of the Code:
Element 3 – Payment card network rules will ensure that following notification of a fee increase or the introduction of a new fee, merchants will be allowed to cancel their contracts without penalty.

By signing a contract with an acquirer, a merchant will have the right to cost certainty over the course of their contract. As a result, in the event of a fee increase or the introduction of a new fee, merchants will be allowed to opt out of their contracts, without facing any form of penalty, within 90 days of receiving notice of the fee increase or the introduction of a new fee.

Merchants may not cancel their contracts in relation to fee increases made in accordance with pre-determined fee schedules, such as those based on merchant sales volume, provided that the schedules are included in the merchant’s contract.

The last resort is to go to your bank from where your current provider is taking money from and instruct your bank to stop direct deposit/withdrawal relationship with that provider. In other words, instruct your bank to stop access to your bank account to that provider.


As of April 1st, Visa and MasterCard have lowered their rates. Now, the base qualified rate is 1.42% for Visa and 1.49% for MasterCard.

Because of the new changes, you can get out of your processing contract free of penalty. Refer to Canadian Code of Conduct.


From January 2017, PBH CANADA has started offering free point of sale (POS) terminals (aka debit / credit machines). No conditions or contracts required. This is drastic difference compared with other processing companies offering POS terminals at $30-60 monthly rental. Or worse pushing you to buy for 1000s of dollars. Some other companies tried to emulate our initiative but failed. They put conditions of minimum processing requirements that merchants simply never qualify for. Our free POS machines are just that – free, no questions asked.


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