Merchant Account Insider Secrets - Accept Credit Cards Online

The process of learning how to accept payments on the Internet is similar to the course of figuring out how to launch a business. What at first seems puzzling and intimidating may be viewed as straightforward and easy to understand if one has the right guide or manual. The following serves as a brief primer for any business owner who needs to set up a system to accept credit cards online, and includes a necessary glimpse of the associated fees.

The savvy business owner who plans to accept payments on the Web must form an alliance with a payment processing company. There are a multitude of firms to choose from, and one should exercise due diligence in the selection process to avoid those that are overpriced and/or do not engage in fair-minded business practices.

Among the throngs of payment processing providers, there are two distinct entities: ones that provide merchant accounts and others that proclaim themselves as "no merchant account" providers. The latter group accepts payments on the owner's behalf and offers a rather easy set-up. Payments are taken on their site (not the owner's), and owed funds are forwarded to the owner two or three times a month.

Merchant account providers (which include financial institutions and independent sales organizations) assert that they give a more professional look to an owner's website since they enable the owner to receive payments on his/her own site. Moreover, they point out that cash flow is less of a problem since entitled funds are transmitted from customer to owner in several days, in contrast to their counterparts' record of periodic monthly payments.

Regarding the all-important issue of price, it is difficult to make any absolute determination about which group offers the overall best rates. For instance, while no merchant account providers waive many of the monthly fees, they typically charge a higher percentage of the ticket price. (All credit card providers charge a percentage of the ticket price, called the discount fee. Most add an additional charge on top of that -- a flat rate -- called a transaction fee.) As a rule of thumb, if an owner anticipates a "moderate" amount of transactions online, he/she may be better utilizing the services of a merchant account provider.

The caveat when choosing a merchant account provider is for the owner to be aware of all fees -- not just the discount and transaction rates. Because the terminology used may be different from company to company, the owner must know the quoted total start-up cost (e.g., set-up fee, application fee, etc.), and total monthly fee (e.g., statement fee, customer service fee, etc.) Among fees that are not commonly disclosed --but any astute owner should ask about -- includes the following:

AVS fee. The fee to determine if the customer's billing address provided by the customer matches the one listed on the credit card.

The non-qualified rate. The amount that the discount and transaction rate will be bumped (higher) to if certain Visa/Mastercard requirements are not met. For example, if there is no AVS match, the owner will likely be hit with a non-qualified rate. Shouldn't the owner be aware that this transpires and the fee that results?

Batch fee. This is a small daily fee charged to batch or close out transactions.

Chargeback fee. This cost is administered when someone disputes a credit card charge. It is important to note that an owner may be asked to establish a "reserve account" at the processor's bank to handle any future chargebacks, especially if an owner's credit is not very good or he/she is receiving a large volume of transactions.

Monthly minimum. The minimum amount that the owner must reach in his/her processing costs. Here is an example to determine this number. Suppose, for example, an owner had only one sale of $100 for the month. If the discount and transaction rates were respectively 2 percent and .30, the owner would pay .02 x 100 = $2.00 + .30 = $2.30. If the monthly minimum is $25, the owner still owes $25 - $2.30 or $22.70.

After all the fees are provided (preferably without an owner's prompting), the owner should use good, old-fashioned number crunching, logic and intuition, and determine who should have the privilege of helping him/her receive payments from customers. The owner is halfway to completing the mission of becoming an Internet tycoon or at least being able to receive a sale.

There are four steps left -- the order form, the secure server with certificate, the gateway, and the shopping cart, if desired. The order form, either supplied by the owner, his/her Web designer or the processing company, is simple to design. Once created, it must be on a secure server. When any customer enters his/her credit card information, it is sent in plain, unencrypted text form to the server hosting the Web site. As it is possible to intercept this data, SSL encryption (usually 128-bit) must be employed. Many merchant account providers offer this secure server with official certificate. An owner who is going to use a payment processing provider should not have to spend money on obtaining this.

The gateway component is next. Just as cars use a tunnel to get from one place to another, the gateway serves as that tunnel to transmit information from the customer to the credit card processor. At first, within seconds of the customer submitting his/her credit card information, the processor either authorizes the transaction or declines it. If an authorization code is given, the customer's account is not charged, but his/her credit limit is reduced. Subsequently, the approved customer's information becomes "captured" and the authorized amount of money is then charged to the consumer's credit card. This capture becomes part of the merchant's batch and travels through the gateway again. The processor then knows to finalize and settle the transaction, and voila, the owner is paid. So the gateway is actually the owner's gateway towards profit! But the merchant account itself is the engine that makes the car go.

Many merchant account providers offer a shopping cart that integrates with their gateway. Even if the owner already has a shopping cart, chances are good that the gateway can work in concert with it. It is best that an owner look for a merchant account provider that can serve as a "one-stop-shop," providing its own secure server with certificate, gateway and shopping cart.

After reading this information, a business owner is now armed with knowledge and a greater understanding of how the payment processing/merchant account field operates. This will empower such an owner and help in determining which company to hook on with among the ever-abundant sea of merchant account providers.

Author, William Hamilton, owns a payment processing company, IntelliCollect, and their merchant account services are listed at http://www.intelli-collect.com. His company offers tremendous assistance to new and veteran business owners -- individuals who need to understand all facets of a merchant account program.

In The News:


pen paper and inkwell


cat break through


10 Second Internet Person, sound familiar?

Some people do not understand the Internet idea of online... Read More

How To Start An Internet Business ? Content, Content, Content

When it comes to e-commerce, the time-tested cliché is, "Content... Read More

Ten Reasons Why Online Surveys Are The Future of Marketing

Customers are tough cookies. They're extremely media aware and increasingly... Read More

The Origins of E-Commerce

What is the Internet?In order to provide a discussion on... Read More

The Clickbank Crash of 2003: Lessons Learned

I had a rude awakening recently. I checked the days... Read More

Drop-Shipping ? A Great Way of Making Money Online

Using the Internet to sell products and services to ever... Read More

Gooooooooooogle It!

....there's much more to Google than you thought:With the wealth... Read More

Your Affiliate Web Site Is Built ? Now What?

When I first got my web site built, I thought... Read More

6 Steps to Attracting Black Customers Online

by Jamila White, "The E-Commerce Diva"In the rush to keep... Read More

5 Tips for Online Shopping

Shopping online has become more and more popular in America... Read More

Dont give up on your business!

Summer must be when many work at home Mom start... Read More

Leveraging Open Source Technology

Open Source applications can bring unique value to business owners.... Read More

What is SSL (the little padlock)?

SSL ("Secured Socket Layer") is a protocol used to... Read More

Say Something Worth Talking About

I recently published a short e-book called 'One Thing I... Read More

Bringing the World to Your Door

According to Internet.com, by the year 2008 nearly 30% of... Read More

How e-business and e-Marketing are Changing

Internet now days became a real marketplace and many many... Read More

Web advertising e-Marketing Places!

Overview:What is web advertising?Internet Advertising is popularly known as web... Read More

The Internet Challenge

In spite of the increasing attention on how the Internet... Read More

Working With Drop Shippers

Drop Shippers, the manufacturers or distributors who are willing to... Read More

Retirement Signature Frames ? The Perfect Retirement Gift!

When most people think of a retirement gift, they think... Read More

7 Must Have Scripts to Look for When Shopping for E-commerce Hosting

When shopping for e-commerce hosting there are a lot of... Read More

Keep Your Customers Happy by Organizing Your Payment Options

Anyone using a slow, or an awkward payment processor had... Read More

Grow Your Business Using B2B Emarketplace - Part I

If you are a small to medium size company and... Read More

Leading eCommerce Consultant Admits You Should Only Listen to One Real Expert! (And its not him!)

Let me share with you a secret that most marketing... Read More

Increasing E-Commerce Website Sales: A Guide for the Online Newbie

Because of this encouraging surge in activity, many individuals are... Read More

The Five Most Commonly Encountered, Off-putting E-commerce Errors

While getting less public handwringing than during holiday season, the... Read More

How To Sell Your Products Online?

E-commerce is gaining pace! Research firm eMarketer predicts that 2003... Read More

Online Consumers ? What Are They Complaining About?

For many businesses, e-commerce represents a tremendous method for generating... Read More

12 Easy and Effective Ways To Create Reports

1. Combine a few of your articles into a free... Read More

Web Users Crave Familiarity

The sad truth is, general Web users would love it... Read More

How To Stay Cutting Edge In Online Business

Let's face it, there's just way too much information out... Read More

Selling From Your Website

Greetings!Friends and relitives ask us all the time " How... Read More

Electronic Commerce Tax Jurisdiction and Principles of Permanent Establishment

The principle of "permanent establishment" is very important for avoidance... Read More