- Examine Fees: There are many different providers out there and as a result there are many different fees levied upon transactions. If you use credit-card processing facilities you’ll be charged:
1) A monthly fee,
2) A Discount rate which is basically a percentage of the cost of the item sold and …
3) A transaction fee.
There are also other fees applied by some providers so you should watch out for that.
- Telltale Signs You Need One: You’re a company with high revenue and receive large sums of cash each month or a business with particular ecommerce requirements. Base your decision on all the relevant info rather than just the fees.
- When you’re making $1000+ per month, get your own merchant account. Look for ‘merchant services’ at your local bank. Having your own merchant account means paying out less in processing fees. If you think you have found a good merchant account provider because the discount rate is low, the application processing is free and approval is guaranteed, then you are probably making a mistake. You sign up for one of those low-discount, overnight-approval account providers. Then, a few weeks after your business info has been reviewed you get your real discount rates, transaction fees, and other fees associated with your account, which are nowhere near the ‘free’ or ‘low-cost’ scheme you imagined you signed up for.
- Receiving money online is not as easy as you might think and when a customer buys an item via the web there are three steps the money goes through before actually getting to your bank-account. These include 1) your web site 2) a payment gateway, and 3) an internet merchant account.
- Payment Gateway: This is basically an internet software service that communicates the transaction info made on your site to the Internet merchant account provider. You can process full name and address, credit-card number, type of card, expiry date, telephone number and any other necessary info. Once all of this information is collected the card may then be billed. After the payment gateway has accepted the payment data details they are transferred to the merchant account provider which is simply a financial institution that lets you process credit card payments. The payment gateway provides the bank with the info and then the credit-card may be billed.
- Don’t expect to toddle down to your neighbourhood bank and get credit-card processing facilities because they are likely not available. There are lots of online credit-card processing service providers that do provide this facilty, however, and will likely be your best bet.
- Rates: You’re probably interested in the average fees charged by these companies. Since there are so many different processing services to select from there are also a multitude of payment structures. In general, however, rates include:- Application fee due up front,
– Discount rate,
– Termination fee,
– Monthly fee,
– Transaction rate and a variety of …
– Miscellaneous fees.
- Things to avoid, if you can: a) Expensive credit-card processing software rental or hire-purchase.
b) Monthly fees.
c) High discounts (the % of your sales they keep).
d) Fat fees up front (anything over $500 is a joke).
e) Salesmen calling you up with a spiel.
f) Getting lumbered with hiring their shopping-cart software as well. Also if …
g) They want a deposit, and …
h) The size of their application fee. And …
i) The usual monthly minimums, discounts etc.
- Internet merchant accounts: If you have a merchant account you could take payments from anyone in any country, but if you are taking them over the phone or the ‘net you must be authorised for ‘cardholder not present’ transactions. If you’re taking credit-card details over the internet, specify that you want an internet merchant account. This is crucial. ‘Cardholder not present’ transactions attract more fraud; if you do them with an ordinary merchant account you risk losing it.
- If you wish to sell on the internet, you need to accept credit-cards. To accept credit-cards, you need a merchant account, or access to one. There’re two ways of getting this: Get one’s own merchant account, or ‘leech’ off someone else’s.
- Set up a secure order form on the internet, then get an ecommerce merchant account and you could trade world-wide. Ecommerce merchant accounts come in two varieties: Third party, whereby you ‘leech’ off someone else’s account, and a true merchant account, which is yours alone. This latter alternative is not as handy as it appears, if your payment gateway vendor (the service that transfers your orders to the bank) doesn’t have good fraud protection. If you’re just setting up, or you have a low volume of sales, use a third-party provider to begin with.
- If your ecommerce merchant account is cancelled for reasons of fraud, you’ll find it quite difficult to acquire another one. You go on a blacklist. The good news is that most gateway providers now have good quality fraud protection. Still, vigilance is important. If an order appears dodgy, a bit too good to be true, it probably is.
- If you have a bank account of years standing, a good credit rating, or a company bank-account, there’s no obstacle to getting an ecommerce merchant account.
- Factoring: You can use a third party to process your payments. They take a percentage of the sale. These are very good if one is just a beginner or your business is small. They also offer more alternatives for payment. This boosts sales. Here are a few famous ones: 2Checkout.Com, PayPal.Com and WorldPay.Com.
- Chargebacks: A chargeback occurs when someone requests their credit-card company for a refund. They claim they didn’t receive the goods, or they never made the order, or the items were not as displayed. This is referred on to the processor, who in turn debits the merchant. Or drops you entirely. You don’t need too many of those.
- Don’t leave large amounts of money ‘on deposit’ in any web-based firm; they’re not banks, and even banks go out of business sometimes.
- Third-party factoring websites have to be extremely strict; they are accountable to their own merchant account provider. Too many bogus orders and they go out of business. This is why third-party factoring facilities like 2Checkout are quite useful to a beginner merchant: fraud prevention. They can filter out dodgy orders.
- Most sellers would like to believe they might sell worldwide. The truth is most of the planet is poor; MOST countries can’t afford your products. So some locals try to acquire them illegally. A clever vendor would bar most of the world from getting at his cart and only take sales from the USA, Canada, Western Europe, Australia, New Zealand and his home country. Harsh, but you’ll sleep better at night.
- If an order looks fraudulent, it probably is. Get in touch with the customer by email or ‘phone. If you don’t receive a satisfactory response or you still have doubts, refund the card. Don’t let greed cause you to make a mistake.
You need to prove to a bank or other merchant account agent that both you and your business are what you say they are.
Your agent is taking a chance on you. You might send them a load of fraudulent orders.
A bank is a business too, not a community service. Help them make the right decision!
The more you can show that you are legit, the lower the cost of your account.