Merchant Account: Does My Pharmacy Need One?

Merchant Account: Does My Pharmacy Need One?

Inside: A merchant account is different than other bank accounts. Learn if you need one and how to choose the right one for your pharmacy.

These days, credit card transactions are just a part of doing business. If you don’t accept credit card payments, your patients will simply find another pharmacy that does. 

But actually processing those payments isn’t as simple as swiping a card. In addition to your regular business bank account, you’ll likely need a merchant account, which will help you process credit card transactions. 

READ NEXT: A Step-By-Step Guide to Starting an Independent Pharmacy 

What is a merchant account?

A merchant account serves as an intermediary between you and a merchant acquiring bank, which manages all the communication required to process and settle a credit card transaction. 

Instead of establishing relationships with Visa, MasterCard, American Express, and all the other various credit card companies, a merchant acquiring bank does all the legwork to authenticate the transaction and get you your payments. 

Here’s what you need to know about merchant accounts in order to keep your independent pharmacy’s credit card payments running smoothly. 

Merchant accounts vs. payment service providers

A merchant account isn’t the only way to accept credit card payments — you can also process payments by using a payment service provider, or PSP. So which one is best for your independent pharmacy? 

Payment service provider

PSPs you might have heard of include Square and Toast. When you use a PSP, you won’t have a dedicated merchant account and your transactions will be pooled with other accounts. 

Compared to a merchant account, a PSP is often less expensive with fewer fees, but because your account is bundled with other merchants’ transactions, your account may get frozen or even terminated because of some other business’s risky decisions. They also sometimes have limits on transactions, meaning if your pharmacy is doing good business, you may not be eligible for a PSP. 

Merchant account

On the other hand, merchant account providers will thoroughly vet and verify your pharmacy in the process of setting up your account, meaning there’s a very low chance of your account being frozen. You also won’t have to worry about transaction limits, and you may even be eligible for a discount if you have higher sales volume. 

Merchant accounts take an individualized approach, which means you may be able to negotiate the terms of your account and get a plan that’s tailored to your needs, while PSPs take a one-size-fits-all approach. 

What to look for in a merchant account

How much it costs to maintain a merchant account depends on the processor you work with. Here’s what to consider before signing a contract. 

Transaction fees 

When choosing a merchant account provider, pay close attention to the fees associated with processing credit card transactions. Typically, plans will require you to pay a flat fee every month to maintain your account and then charge a fee for every transaction on top of that. 

How these fees are charged depends on the account provider. Some will charge a flat fee per transaction while others will charge a percentage plus a flat fee.

Some providers will charge different fees for different types of transactions. For example, it could cost more if the credit card number is typed in instead of swiped. 

If your pharmacy is thinking about moving into e-commerce, pay close attention to the terms for transaction fees, as virtual transaction fees tend to be higher than those for in-person transactions. 

Monthly minimums 

Just like your primary wholesaler contract, which outlines minimum purchase requirements, your merchant account provider may require you to hit a minimum amount of total processing fees every month. 

So, if you are charged a processing fee of 8 cents per transaction, and your monthly minimum is $25, you’ll have to run 313 credit card transactions in a month to hit your minimum. 

If you don’t meet this monthly minimum, you’ll likely only have to pay the difference between your total processing fees and the monthly requirement.  

However, if you are consistently not meeting your monthly minimum, a payment service provider may be a better option for you. 

Other fees

Before you sign with a merchant account provider, dig into the contract to find out what extra fees you may be responsible for. Common fees include: 

  • Setup fees: These are one-time fees paid when you set up your account. The actual labor required to set up a merchant account is minimal, so high setup fees can be a red flag. 
  • Early termination fees: To set up a merchant account, you will often have to commit to using the service for a year or more. If you want to change merchants before that time is up, you could get charged an early termination fee based on how much time you have left on your contract. 
  • Chargeback fees: If a patient disputes a charge, your pharmacy will have to pay a fee for the chargeback.  
  • Statement fees: Watch out for miscellaneous fees that are added to your monthly bill, like a fee for sending the bill in the mail. While these fees are typically small, they can add up over time.   

Hardware needs 

In order to run credit card payments, you’ll need a terminal. The best terminals can read credit cards by swiping, through an NFC chip reader, and accept contactless payments like  Google Pay or Apple Pay. 

Some merchant account providers will try and convince you to lease a terminal from them — and lock you into a contract. But for most pharmacies, buying a terminal outright is typically a more economical solution than leasing. 

While a “wireless” terminal may sound more high-tech, wired options are often more reliable. With a wireless terminal, you won’t be able to process transactions if your internet fails, and you may even have to pay an additional fee every month for a data plan. 

Support options

If you lose the ability to process credit cards, your entire pharmacy will grind to a halt. That’s why it’s critical to find out what kind of support and customer service options your merchant account provider offers. 

If your pharmacy is open outside of the regular Monday through Friday, 9 a.m. to 5 p.m. hours, you should work with a merchant account provider that can provide support during those non-traditional business hours. 

Seek out a provider that offers support through several different channels, like email, telephone, or chat support. 


A Member-Owned Company Serving Independent Pharmacies

PBA Health is dedicated to helping independent pharmacies reach their full potential on the buy-side of their business. Founded and owned by pharmacists, PBA Health serves independent pharmacies with group purchasing services, wholesaler contract negotiations, proprietary purchasing tools, and more.

An HDA member, PBA Health operates its own NABP-accredited secondary wholesaler with more than 6,000 SKUs, including brands, generics, narcotics CII-CV, cold-storage products, and over-the-counter (OTC) products — offering the lowest prices in the secondary market.

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