Accept Credit Cards Online
E-commerce has become much easier in recent years, as web site operators have gained ready access to online check and credit card payment processing services. Sites that can accept credit cards online, attract much higher levels of business. Credit cards must be processed through a merchant who has a "merchant account". While these are fairly easy to obtain in the United States, they are usually offered for a fee or by companies that charge a monthly fee to process transactions, on top of a per transaction fee.
Online Payment Processing
Accept credit cards without your own merchant account - use third party merchant accounts:
The simplest way to get launched in e-biz is to sign up for payment processing through a service that offers "third party merchant accounts". For example, if you sign up with XYZ Ltd to process your transactions, your customers will go to a page at WYZ.com where the order is processed; their credit card bills will show a charge to XYZ Ltd. Once the credit card is charged, your customer is returned to your site to complete the purchase (such as downloading software). As your business grows, you should acquire your own merchant account, as the cost per transaction is usually lower in the long term.
2CheckOut.com offers third party merchant accounts with no monthly fees or minimums. For a $49 setup fee 2CheckOut will process your credit card orders and checks using their secure server. Their fees are $0.45 per transaction plus 5.5% of the transaction amount. There is no term contract and your account is created instantly. This service is an excellent choice if you sell services, eproducts, or charge memerbship fees - recurring billing is supported, too! International merchants and customers are welcome, with payment processing available in 12 currencies. Accept Credit Cards within minutes for a low one-time fee and instant set up, Click Here
BizHosting includes credit card processing through a third-party merchant account as part of its website hosting service. Along with automatic approval for credit card processing for US-based businesses, you get shopping cart software and web-based e-mail. Their rates start at $21.95 per month for complete e-commerce packages that include web hosting, shopping cart software, and credit card processing. Credit card transactions are subject to a low per transaction fee by ProPay. Get a merchant account and a website for as low as $21.95 per month when you host your site at BizHosting - E-commerce made Easy!
PayPal is one of the pioneers of internet credit card processing without a merchant account. There are no set up fees, and the basic transaction costs are very low: $.30 plus 2.2 to 2.9%. It's a very easy way to facilitate payment and it has a wide international program. You can set up individual buttons to sell specific items from your web site or use their shopping cart features. International merchants are welcome and multiple currencies supported. Setup takes a few days as they verify your banking and credit card information. PayPal also allows for a "trial period" that delays the actual processing of the credit card - useful if you want to let your customers try your out services for a 30-day free trial, for example. Get started for free - no setup fees!
Get your own merchant account to accept credit cards online:
Electronic Transfer Inc. - free application and instant online set up for credit card processing. Their fees are very low priced: 2.18% plus $0.29 per transaction, and $19.95 in monthly fees. For US citizens with a physical business address in the US. Merchant Accounts with no application fee
AMS Merchant Accounts offers internet and in-store merchant accounts for realtime payment processing. Low credit card processing fees: 2.25% and $0.30 per transaction plus $20 in monthly fees. Authorize.net gateway software required to be pruchased for $99.
Merchant Express provides a low cost merchant account credit card processing service and free shopping cart software. For internet transactions, the costs are $10 per month plus 2.28% + $0.30 per transaction for processing and verification. Real time Internet processing requires their software and gateway services at an extra cost.
Accept checks online: Paybycheck.com offers a different option for online payment processing - with their service you can accept checks for payment. Funds are deposited directly in your existing bank account. Setup fees are $99, monthly charges are $39.95, plus there is a per check charge as well. Only works with US based checking accounts. Accepting Payments Online: Merchant Accounts vs. Third Party
If you want to sell online, you need to be able to accept credit card payments. The traditional way is to open a merchant account. However, opening a merchant account is expensive, especially for small businesses who are just starting.
In the last few years, however, a number of companies have entered the market with a new concept: third party credit card processing services (for example, Paypal). This option offers small businesses a quick and easy way to accept cretit card payments. It by-passes the need to open a merchant account, plus, the sign-up process is much easier and faster: you can literally sign-up, be approved and start accepting payments online in minutes.
Traditional merchant accounts are expensive primarily because they charge fixed fees that you will have to pay even if you don't sell anything.
For example, depending on the case, a merchant account will require that you pay:
-An application fee (whether you are approved or not)
-A set-up fee (once your application has been approved)
-The discount rate: usually between 2% and 3% of every sale.
-A per transaction fee.
-A monthly minimum fee (if the dollar amount of the discount rate falls below the amount of the fee).
-Statement, gateway and connection fixed fees.
Third party credit card services usually just charge a percentage of sales and, in some cases, a per-transaction fee, so you only pay when you sell something.
If your sales volume is not very high, a third party service can save you money.
For example, lets assume that you make 10 sales a month at $25 per sale, to compare the merchant account option vs. the third party option:
If a merchant account charges you a $25 montly minimum fee, $50 in gateway and connection fees, a discount rate of 2.0% of sales, and a fee of $0.30 per transaction (for simplicity's sake we're not factoring in any application fee or set-up fee), the charges you would have to pay your merchant account provider amount to $83.00.
If you use a third party service that, like Paypal, charges you 2.9% of sales plus $0.30 per transaction, it would only cost you $10.25.
However, the advantages of using a third party service start to diminish as your sales start growing. In other words, since the discount rate charged by traditional merchant account providers is lower than the percentage of sales charged by third parties, the higher your sales the more the fixed fees of the merchant account will be offset by its lower discount rate.
For example, let's assume that instead of making 10 sales per month, you make 1000 sales, at the same $25 dollars per sale (total sales per month: $25,000). You will then have to pay your merchant account provider $850.00 (the $25 minimum will be waived because the dollar amount of the discount rate will be greater than $25).
If you use the third party service, you will pay $1025 for the same $25,000 in sales.
Your break even point in this example would be 222 transactions (sales) of $25 dollars each: if you make 222 sales or less, you would be better off with a third party service. If you make 223 sales or more, your best bet would be a merchant account.
In summary, the more you sell the more you should consider opening your own merchant account. However, if you are a small business just beginning to market your products on the net, or if you want to start quickly and don't expect huge sales in the near future, you may want to go the third party route.
The two best known third party credit card services among web marketers are Paypal and Clickbank.
PayPal began in 1999 as a tool for transferring money for payment in eBay auctions and is currently the most popular online payment system of its kind, with over 35 million accounts at the time of this writing (December 2003), and a fee structure of 2.2% - 2.9% of sales plus $0.30 per transaction.
Clickbank specializes in serving web marketers that sell digital products, which are directly downloaded from the Internet. These products are offered through Clickbank's extensive network of over 100,000 affiliate sites. Merchants of digital products simply place a sales link on their site and Clickbank handles the credit card processing. At the time of this writing, Clickbank charged a one time $49.95 set-up fee, a processing fee of 7.5% of sales and a $1 fee per transaction.
In summary, check all your options first and choose the one that is most likely to fit your needs in the long run. Remember that cost is only one of the variables you should consider in your analysis. Spending some time visiting the websites of merchant account providers and third party credit card service providers, and doing your due diligence early, can save you thousands of dollars in the future.
How Merchant Accounts Can Save You Money
We all know that accepting credit cards is the key to online sales. Unfortunately, most merchants are unaware that acquiring a merchant account can actually save them money. And in many cases, big money!
For this experiment, we will use a fictional character named Bill. Bill owns and operates a great online resources for marketing tools and resources. Bills website is a membership based website, and therefore could potentially be approved for both third party processing and an internet merchant account. Bill starts off processing his business with a popular third party processor who offers him the following plan:
Start Up Fee None
Monthly Fee None
Transaction Fees 13.5% (Initial or One Time)
15.0% (Recurring)
Bills sets up his business with this popular third party processor and charges $30 per month. He has built an extensive reciprocal link exchange directory, has purchased some PPC advertising on a few of the best search engines, and has reached a excellent spot in the content based search listings for the top 5 search engines. His customer base has grown from zero before accepting credit cards, to 150 members, is just one month. Bill can't believe his success at internet marketing, and is planning on building even more web based resources and tools for his website, thus increasing the value and content. He is ecstatic at the initial results, so let's take a look at Bills numbers:
$30 (Per Membership Sold) x 150 (Memberships Sold) = $4,500.00
$4,500 x 13.5% (Initial or One Time Transactions) - $ 607.50
$4,500.00 (In total sales)
- 607.50 (Total fees)
= $3,892.50 (Net profit after all processing fees have been deducted)
Ok. Well Bill certainly had an excellent first month accepting credit cards with his new business venture. But let's see how Bill would have made out if he would have secured an internet merchant account for his new business:
Start Up Fee None
Monthly Fee $15.00
Discount Rate 2.35% (Initial, One Time or Recurring)
Per Trans Fee .30 cents
Gateway Mo. Fee $15.00
AVS Fees .10 cents
Now the first thing we see is that the merchant account company is showing us more fees. This may be disheartening at first sight, but we should really explore what these fees are, and how they affect our bottom line.
Start Up Fee: This remains the same. Bill paid zero to get setup with his new merchant account, just as he paid zero to get setup with the third party processing account.
Monthly Fee: The third party processor offered us no monthly fees, yet we must pay $15.00 with the merchant account company.
Discount Rate: The merchant account has labeled one of their fees as discount rate. These fees are the fees Bill will pay as a percentage of each transaction. They are similar to the main fee charged by the third party processor. This fee when charged by the merchant account company is substantially smaller than the high percentage charged by the third party processor. But we will wait till the end of this experiment to see who offers the better comprehensive deal.
Per Trans Fee: The merchant account company charges Bill .30 per transaction he processes through his merchant account. Of course, we have already established that Bill will pay no per transaction fees with the package he received from the third party processor.
Gateway Monthly Fee: Because Bill will also need an internet payment gateway for his merchant account to work online with his website, he will also be paying $15.00 a month for his Gateway Monthly Fee.
AVS Fees: The AVS fee stands for Address Verification Service. Bill will want to use this service, to help reduce potential fraud, and customer chargebacks to his merchant account. He will now pay an additional per transaction fee of .10 per transaction.
Let's see the numbers behind processing with a merchant account as opposed to a third party processor:
$30 (Per Membership Sold) x 150 (Memberships Sold) = $4,500.00
$15.00 (Merchant Account Monthly Fee) - $15.00
$15.00 Gateway Monthly Fee) - $15.00
2.35% (Discount Rate) x $4,500.00 - $105.75
.30 cents (Per Trans Fee) x 150 (Memberships Sold) - $45.00
.10 cents (AVS Fees) x 150 (Memberships Sold) - $15.00
Total Fees (With Merchant Account) = $195.75
$4,500.00 (In total sales)
- 195.75 (Total fees)
= $4,304.25 (Net profit after all processing fees have been deducted)
With the merchant account, Bill was able to keep substantially more of his sales for himself, as profit. Bill could use these extra resources to advertise more, expand his operation, and even hire someone to work for him, even if only on a part time basis. The point is that that the better deal in credit card processing is always with a merchant account as opposed to using a third party processor. Most third party processors leverage the high levels of risk and chargebacks they must face everyday, by charging enormous fees and rates to their entire customer base. Third party processors are synonymous with Adult related websites. This is the reason for their increased exposure to risk. They must charge high rates to overcome the losses they are subject to by processing for a category of merchants that, unfortunate as it may be for them, falls into a certain level of risk and fraud that most other merchants do not. Because the merchant account company restricts its clientele to only companies with non adult related content, they are able to offer an entrepreneur like Bill, selling online content through his membership based marketing website, a much better deal in credit card processing.
$4,304.25 (Net Profit with Merchant Account)
- 3,892.50 (Net Profit with Third Party Processing)
= $411.75 (Total Savings with Merchant Account)
This experiment has shown that the average website owner can save substantially by choosing wisely when it comes to their credit card processing solution. We have proved that most any entrepreneur can and will save substantial amounts of money by using a merchant account for their online credit card processing, as opposed to processing with a third party processor. In our little test, Bill saved $411.75, and that was just in the first month alone. Remember, that the third party processor will charge more, 15.0% to be exact, per transaction, once the customer is charged on a recurring basis. This means that for the second month, Bill would have paid even more to his third party processor; $675.00 to be exact! And that is just on the first months returning 150 customers. Every time Bill has a recurring payment processed through his third party processing account, he would be subject to a 15.0% transaction fee on all those sales. Not a very thrifty choice for credit card processing.
As with any business decision, be smart. Compare rates and plans, and make sure the simple setup is really worth the cost. In most cases, your Merchant Service Provider can setup your merchant account in as little as 24 hours. This is faster than your third party processor, and adds even more value to the otherwise already vastly superior deal you are receiving with your very own merchant account.
Make the decision that is best for your business, and best of luck! Please visit Josh Greth at CardStreet.com.
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