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What is
internet merchant account ?
An Internet
merchant account is a type of bank account that allows you to accept credit
card payments online. It handles fraud checks on each transaction, as well as
the transfer of funds from your customer’s credit card to your bank account.
You will need a merchant account in order to perform any online credit card
transactions. So An Internet merchant account is not an actual bank account -
it is more like a line of credit that enables the credit card networks to
route funds to you quickly (within a couple of days) rather than having to
wait for the credit cardholder to pay their monthly statements. There are
many, many, sales organizations that offer the Internet merchant account.
an Internet merchant account
Setup and purchase costs have drastically fallen over the years. You can
expect to pay $99 and up, on a real-time processing solution for your Internet
business. However, processing rates and fees for an Internet merchant account
have pretty much stayed the same. Discount rates range from 1.99% to 2.59%.
And transaction fees range from $0.30 to $0.35 cents on average. Most places
charge a monthly gateway fee as well; This usually ranges from $10-$20/month.
However, if you search hard enough you'll find a company who doesn't charge a
lot of the typical monthly fees you see out there.
Why are processing rates higher
for an Internet merchant account? It all goes back to the fact that the
customer's credit card is not actually swiped through a terminal, like in
retail storefronts. Since this is the case, it is believed that there is a
higher risk of fraud, hence the reason for higher processing rates.
If you have a bricks and
mortar business then you have a merchant account that enables you to accept
point of sale (POS) transactions where the buyer is present to ‘swipe’ his or
her credit card at the time of purchase. If you have a mail order or telephone
order business then you probably have a MOTO (Mail Order/Telephone Order)
merchant account. If you want to accept credit cards over the Internet you
will need the latter type of account.
A merchant account for an
online business is similar to a merchant account for a mail order business in
that there is risk associated with the fact that the buyer and credit card are
not physically present – this is called a ‘cardholder not present’ (CNP)
transaction. While authorization for a CNP transaction validates that the
cardholder has sufficient funds in his or her bank account, it does not assure
payment of the transaction since there is no guarantee that the cardholder is
initiating the transaction. In other words, the chance of fraud is increased
and because of the amplified risk these types of accounts tend to be more
costly.
There are two options
available for establishing your Internet merchant account - through a bank or
through an independent sales organization (ISO). An ISO acts as a third party
between the merchant and acquiring bank (merchant bank). The option you choose
will depend on how risky your business is and the costs you can afford to pay.
If you have a bricks and
mortar business and want to sell online, it is recommended that you go to your
current bank for an Internet merchant account because you already have an
established relationship with them. Since your current bank has access to your
existing accounts and financial information, the application process may
proceed faster and the likelihood of securing an account is increased. If you
acquire your Internet merchant account through a bank that you do not normally
do business with, ensure that your Internet merchant bank can transfer funds
to your regular bank.
Banks offer security,
reliability and stability, but they are more selective when opening Internet
merchant accounts. ISOs tend to be more flexible towards riskier businesses,
such as online casinos or adult sites, but they will generally charge more for
accepting this risk. Also, they are not as regulated as banks and therefore
may not be as dependable. Consequently, you should only go to an ISO if you
have been turned away from your bank.
Once you open a merchant account,
the bank arranges a third-party processor to set up a mechanism for accepting
credit card payments. U.S. Bank, for example, uses
CyberCash, a company that offers Web-based payment-processing
software. The merchant downloads this software directly from CyberCash, and is
given the option to buy the software or lease it on a monthly basis. This is
typical of many bank merchant account arrangements.
Drawbacks to consider: The time
and involvement that may be required for software or equipment installation is
something to keep in mind. You may wish instead to choose another provider
type that consolidates this process. Also, banks usually have stricter
chargeback policies than ISOs. Chargebacks include disputed charges and
fraudulent charges.
According to Tim Mahan of Merchant
Card Services, banks tend to shut down merchant accounts as a result of
chargebacks without first working with the merchant to reduce the chargebacks.
ISOs usually will offer advice and customer support to the merchant before
they terminate an account.
How do I choose a
merchant account provider?
As far as choosing the
merchant account, we leave that up to you. The only thing we recommend is to
go with someone who you have done banking with before. Most people use their
local bank to set up the account. So When you're ready to open a merchant
account, the best place to start is with your local bank. If your business is
less than 2 years old, you still should be able to establish a merchant
account, provided you have a history, either business or personal, with that
institution. If you have problems to get merchant account through your local
bank - There are many companies that offer merchant accounts on the net and
the one that we know works with the Miva Shopping cart and Verisign's payment
processing is Online Data Corp http://www.onlinedatacorp.com/ and click the
section to get a Merchant Account. Their prices are quite reasonable.
Determine Your Needs
Choose between batch
(manual) payment processing or real-time payment processing.
Manual processing means
the order is received with the credit card number through a phone call, fax,
or online form and processed manually, either by contacting the payment
processing company to verify the credit card number or by using a point of
sale terminal to swipe the card.
In contrast, real-time
payment processing means the credit card is automatically processed when the
customer submits an order. Once the credit card is verified and approved, the
customer receives immediate notification that the order is accepted and the
funds are transferred from the customer’s bank account to the merchant’s
account.
Whether you choose batch
or real-time processing depends primarily on the number of transactions that
occur on your site. If you expect low volume sales then manual processing is a
viable route. It is not only less costly than real-time processing but it also
protects against fraud, as you have more control over the processing
procedure. The major disadvantage is the amount of time it takes to manually
process orders.
On the other hand,
real-time processing is better for large volume sales and for products that
are sent electronically. Time is saved in processing the order, but it is more
expensive to have and requires continuous monitoring to ensure there is no
downtime.
Examine Your Business
And Determine Your Critical Success Factors
Products and Services:
The products and services you sell will determine the transaction fees you can
afford to pay. For instance, if your products are small, inexpensive and sold
in high volumes then it is beneficial to choose a provider that offers low
transaction fees, which usually range between $0.20 and $0.70. Otherwise, the
fees will chew into your profits.
Business Duration: In
many cases, the length of time you have been in business will influence the
number of transactions you have on your site and the level of your transaction
fees. For instance, some banks require a minimum number of transactions per
month. If you do not meet this minimum, you could be required to pay
additional fees. Some banks will ask you to estimate the number of
transactions you expect on your site. If you are a new business, estimate
conservatively.
Internal Resources: Your
internal resources will influence the type of services you need from your
provider. For instance, if you lack technical resources, then it would benefit
you to select a merchant account provider that focuses on customer service and
can work closely with you.
Existing Solutions: Your
existing technology solutions may include the provision of an Internet
merchant account. As a result, before you go to a bank or ISO, review the
package that you have with your hosting company or E-commerce provider. If the
package includes an Internet merchant account, evaluate what it comprises and
ensure it is acceptable for your business.
Evaluate Your Hardware,
Software And Service Requirements
Integrated Systems: When
you decide to sell online, selecting a merchant account provider is only one
consideration. You also need a storefront solution to enable customers to send
orders, a payment system to process transactions, and a payment gateway to
securely process payments as they travel from a customer’s site to your site.
A number of merchant account providers offer integrated systems (turnkey
solutions) that include each of these components, as do hosting companies and
E-commerce solution providers, which bundle merchant accounts and other
services into their packages.
Merchant account
providers that offer integrated services can be expensive because in many
cases they work with agents who make their money through commissions. As a
result, costs are often ‘marked-up’ so the provider can make an acceptable
profit. On the positive side, working with a merchant account provider that
offers integrated services means that each level of the transaction is
compatible with the other.
If the merchant account
provider does not offer integrated services, it is important to ask what kind
of software it requires.
Hardware/Software: Your
hardware and software requirements will depend on your processing method
(batch or real-time) and business needs.
If you decide to
implement real-time processing, you will require payment gateway software to
authorize and process the credit card number in real-time.
If you choose batch
payment processing, you essentially have two options that enable you to
manually process orders. One, you can purchase software that allows you to
transact your orders manually. The software is housed on your computer’s hard
drive and is connected to your bank through a modem and telephone connection.
Second, you can buy a point of sale terminal to key in credit card numbers as
they come in.
Leasing a terminal is an
option, but it is not always the cheapest route. For example, perhaps you want
to purchase a POS terminal that would cost you $400 to buy. To lease the same
terminal using a 10 percent interest rate for three years you would pay $520.
So, in fact you are paying $120 more than if you had purchased the terminal.
And, in most cases, the original price is marked-up to start. Therefore, it is
better to shop around and look for the best purchase deal.
Security: Whether you
host your own site or house it on the server of a web hosting company, it is
important to ensure you have security measures in place to protect sensitive
information. The majority of web sites use SSL (secure sockets layer), an
encryption program that will encrypt credit card information during the
transaction process. As well, you should ensure you have redundancy systems in
place and clear service level agreements with your provider, which provide a
complete description of the services it is obligated to deliver.
Ask Questions
When choosing a merchant
account provider, consider the following questions.
Q: What are your
criteria for providing merchant accounts to Internet businesses? What kind of
information do you need from me?
Here's what you may or may not
(depending on the provider) need in order to obtain your merchant account:
- Credit history
- Length of time in
business
- Business type
- Types of products or
services
- Price of products or
services offered
- The market segment in
which you operate
- Business financial
information
- Average order size
- Average monthly amount
- The processing method
in which products and services are being sold and delivered (manual or
real-time)
- Refund policies
- Other sources of
income
- Business location i.e.
it is difficult to get a US merchant account if you are not located in the
US
Pictures of business office and location (this extra step can save you
money in credit card processing costs)
Provide trade references
A
photocopy of your drivers license
Q: What fees do you
charge for your products and services?
Typical fees include
transaction, discount and set-up or application fees and could range in price
according to the merchant account provider and your business (credit history,
type of business, transaction volume).
Q: Do you offer
integrated services?
Some merchant account
providers offer integrated systems that include a storefront solution to
enable customers to send orders, a payment system to process transactions, and
a payment gateway to securely process payments as they travel from a
customer’s site to a merchant’s site. If the provider does not offer
integrated services and you need to go to different providers, it is important
for you to ensure each of these components is compatible with your merchant
account.
Q: Do you have a
minimum transaction number per month?
Some merchant account
providers require a minimum number of transactions per month. The volume of
your transactions can impact your overall costs.
Q: If you charge per
transaction, what do you consider a transaction?
It is important to
understand the transaction process otherwise you could end up paying more than
you anticipate.
Q: What is the time
delay between a transaction and when the money is available in the bank?
The time delay is usually
two to three days.
Q: Do you have a
service level agreement I can review?
The service level
agreement will identify the services to be provided by the provider, define
the terms of responsibility to the customer, and outline remuneration if those
responsibilities are not met. Ask your provider about them.
Q: Under what
circumstances can my account be terminated?
Imagine arriving at your
office one day and realizing your account may be terminated. For example, a
high rate of charge backs could lead to termination of your account. This
development is a serious threat to your business as it can negatively impact
the loyal customer base you have created.
Q: What storefront
solutions, payment gateways, and E-commerce back-ends are compatible with my
merchant account?
When conducting real-time
processing, your transactions will not execute properly if each of your
E-commerce components is not compatible.
Q: What security
features do you have?
Your merchant account
provider should have ways to reduce the risk of fraud during the transaction
process. Namely, they should have software like SSL that will encrypt
sensitive customer information.
How much will a merchant
account cost me?
Merchant Accounts Rates & Fees
These are the typical fees you will see associated with a merchant
account. Rates will vary from one provider to the other. We have found
ECHO, Inc.
to offer the lowest merchant account pricing around,
click here
for details.
Application/Setup: $0 - $100+ (one time fee)
All providers have an application fee. Some charge it right out at the
beginning, while others add it into the solution purchase/lease costs.
Hardware/Software: Purchase: $99 and up or Lease: $20/month and up
One important note worth mentioning here, stay away from leases if all
possible. It's always better to purchase from the beginning than pay a lease
for the next 12, 24, 36 or 48 months. Why? With a lease you'll end up paying
sometimes 3 times or more then if you would of just purchased the solution
outright from the beginning. While a $29.95 monthly lease for 48 months sounds
good in reality it isn't. Leases are very hard to get out of once started. If
your business goes under before the 48 months are up, you still have to pay on
the hardware/software costs until the last penny has been received by the
leasing company. Also, the lease fee you see
does not include your state sales tax or the amount charged for the
damage/loss waiver. If you do go for the lease, always determine the lease's
buyout clause, end of lease terms, and especially beware of clauses that allow
the lease company to
continue charging you even after the 48 months have passed (they say that you
should contact them in writing one month prior to the end of the lease, or you
can just let them keep charging you).
Programming: $0 - $100+ (one time fee)
This usually only applies to retail merchants who have changed from one
provider to another. The programming process isn't difficult but watch out for
the cost, some
providers may nickel and dime you on programming fees. Why do they charge this
fee if you use your own equipment? It's used to somewhat make up for the loss
of not selling or leasing you their equipment.
Discount Rate: 1.49% - 4% per transaction
This is the fixed percentage amount that is deducted from the purchase cost.
The lower discount rates are for retail establishments while the higher are
for Mail Order/Telephone Order (MOTO) and Internet-based businesses. Why the
lower
cost for retail? The instances of credit card fraud are much lower so banks
are able to charge lesser percentages for these types of businesses. A typical
discount rate for US business is right around 2.49%, perhaps a little higher
or a little lower.
Non-US businesses will pay a higher discount rates closer to the 3% to 4%
range.
Don't let a few tenths of a percentage point be the deciding factor between
two providers. For example, if Provider "A" charges 2.29% and Provider "B"
charges 2.49% you'll only save $0.20 for every $100 processed through your
merchant
account.
Transaction: $0.20 - $0.50 per transaction
In addition to the discount rate a transaction fee is also deducted from the
purchase cost. Also, just as with discount rates, transaction fees are lower
for retail businesses while slightly higher amounts are charged for MOTO and
Internet
establishments. Address Verification (AVS) may either cost an additional fee,
or may be included in the base transaction fee. The typical transaction fee
for US businesses is right around $0.30 while the higher end of this fee is
sometimes the case for Non-US businesses.
Monthly Minimum: $0 - $25 per month
The fee is based on your transaction and discount rate fees from your credit
card sales each month. For instance, say your bank charged $25 as a monthly
minimum, the transaction and discount rate fees collected by the bank must
equal or go over
$25 each month. If this is the case no monthly minimum will be charged.
However, if the fees collected for that month do not meet the $25 minimum, you
will then be charged the difference. Not all processors have a monthly minimum
fee, however most do.
Gateway Access: $0 - $25+ per month
Since in most cases, the Secure Payment Gateway provider (e.g. Authorize.Net,
VeriSign, etc.) is a separate company from the Merchant Processor, they charge
extra fees. For every month that you are on their system, you pay an access
fee.
The usual fee to pay for gateway access is around $10.
Statement: $0 - $15 per month
The statement fee is charged because at the end of each month you will receive
a statement from your processing bank that will list all the transactions that
went through for that particular month. It's very much like your credit card
or telephone bills.
Daily Close-Out: $0 - $0.15 each day
Associated with software and terminal processing solutions where at the end of
every business day you close-out all your transactions. Most providers no
longer charge this fee.
Address Verification System (AVS): $0 - $0.05 per transaction
The AVS service checks to see that the billing address given by the customer
matches the credit card. If you opt not to use AVS, VISA and MasterCard will
not support your transactions and will charge you an additional 0.17% to 1.25%
on those sales. Most merchant accounts come with AVS at no extra charge. If
there is a charge, it is combined in with the per transaction fee in most
cases. The AVS service works only with US credit card holders. Currently,
there is no AVS service
in place for non-US credit card holders.
Chargeback: $5 - $25 per instance
A chargeback occurs when the cardholder disputes a charge that they found on
their monthly credit card statement. A large number of chargebacks can cause
your merchant account to be dropped totally and leave you in a bind when
trying to
get another merchant account for your business. If this is the case you may
not be able to get another merchant account for several years. As a merchant
it is important that you take the necessary steps to reduce and potentially
eliminate the
instances of chargebacks.
Reserve: Varies, ask the provider for details
Some providers will require you to have a reserve account where the amount is
determined by your businesses estimated sales receipts. Usually a reserve is
almost always charged to a Non-US based merchant who is trying to obtain a
merchant account. Also, businesses that do a high volume of sales each month
may be charged a reserve fee. Otherwise, there usually isn't a charge. In
most cases, the reserve fee is used to cover for any chargebacks on the
merchants account. A reserve should be avoided if all possible.
Annual Fee: $0 to $100 per year
Some credit card processors will charge this fee just as
additional way to pay for maintenance and system upgrades. This fee usually
isn't disclosed upfront. Ask your merchant account sales representative for
information.
FREQUENTLY ASKED
QUESTIONS :
I already have a
retail merchant account. Why do I need another one?
Financial institutions and the Visa / MasterCard card Associations have
different criteria for evaluating the potential risk involved in credit card
transactions where the card is not physically presented to the merchant. This
type of business is typically referred to as "card not present" or "MO/TO"
(mail order/telephone order). For this reason, a separate merchant account is
needed.
If you currently accept credit cards at your brick-and-mortar store, check
with your financial institution to find out if your account can be used for
online sales as well. If not, you'll need to obtain a Card Not Present (CNP)
merchant account.
|
Some Merchant Account
providers |
Take a look at our
showcase of merchant account providers and identify which ones meet your
business, hardware and software, and cost requirements. There are numerous
options available. Take a look and find the one that best meets your needs.
|
ECHO |
We have found
ECHO, Inc.
to offer the lowest merchant account pricing around,
click here
for details. |
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Merchant Account
Tips
Tips for Merchant Account Holders
Once you have your merchant account you will need to take
necessary precautions to avoid chargebacks and fraud. Here are some tips to
follow:
1. Collect CVC2 and CVV2 Verification Numbers
This tactic alone can not only reduce instances of chargebacks by 26%,
according to Visa, but also reduce any pass-through fees that may be charged
when a credit card order is conducted. On the back of MasterCard, most Visa
and Discover credit cards is a 3-digit security code located right after your
credit card number. Requiring customers to give the 3-digit code acts as an
additional verification measure. American Express cards also have a similar
security code that is located on the front of the card right above the
cardholder's account number and is usually 4-digits long. Most online payment
processors support entering the security codes when processing credit card
orders. Check with your payment gateway provider (i.e. Verisign, Authorize.Net,
ECHO Inc., etc) for details.
2. Use Address Verification System (AVS)
AVS checks to ensure the address entered on the order form matches the address
to where the cardholder's billing statements are mailed to. People ordering
products and/or services using a stolen card number will never use the real
cardholder's billing address, so this is your chance to stop the order before
it's too late. AVS only works with orders conducted in the US. Failure to use
AVS when processing
credit card transactions will always result in paying higher credit card
processing fees.
3. Scrutinize orders from developing foreign countries
A large percentage of fraudulent Internet purchases are made from Indonesia,
Russia, and other eastern block or developing countries. Accept orders from
such countries at your own risk until a worldwide AVS system is developed.
4. Let customers know what name will appear on statements
Many merchants who use 3rd Party Processing companies have run into problems
because the company name that appears on cardholder's monthly statements is
usually the name of the 3rd party processing company and not the company name
of the site the cardholder made their purchase from. This isn't always the
case, but in many cases it is. If you use a 3rd party processor, and even if
you don't, make sure the customer knows what name will appear on their credit
card statement at the end of the month. This will help to reduce any confusion
that might would otherwise occur.
5. Handle suspicious orders accordingly
If an order seems suspicious the best way to handle the situation is to either
call or e-mail the customer and attempt to verify that they placed the order.
As a rule of thumb, if in doubt, check things out. It may be a good idea that
if a customer makes an unusually large volume purchase from your site to
follow-up with a verification call.
6. Watch out for orders using free e-mail addresses
Be wary of accepting orders from people who used a free e-mail address when
ordering (i.e. Hotmail, Yahoo, etc.). Tracking people who used a free e-mail
address is almost impossible, it's much easier for them to get away then if
they used their Internet Service Provider (ISP) or their own company web site
e-mail address. To check whether an e-mail address is a freebie or not just
take the part of the
address after the "@" symbol, add "www" to the front of it and see what
website it brings up (i.e. joe@yahoo.com = www.yahoo.com).
7. Signatures on delivery
If your business delivers products use a carrier that requires a signature on
delivery, and allows you to have a copy of the signature. Retain these for
your records.
8. Request fax copies of ID and credit card
You may want to request your customer to fax a copy of both sides of their
credit card and driver's license. This tactic usually works best in a B-to-B
(business to business) sales environment. While this is not a defense under
Visa or MasterCard rules, it is yet another way to deter fraud.
9. Posting a warning message
Taking the time to post a warning message on your order page to those who may
attempt to make a fraudulent order will greatly deter the number of instances
of fraud. Be sure to mention that IP (Internet Protocol) addresses are being
logged. IP addresses can come in handy when locating people about fraudulent
orders.
- Is is better to lease or purchase? ...rent?
Always remember if you choose to lease you will end up paying more than if
you would just purchase the processing solution from the beginning.
There are some merchant account providers that can even set you up on a
month-to-month rental program. The nice part about this is you can cancel at
any time, unlike if you signed a contract for a 48 month lease. It's also nice
if you don't have the money up front to purchase the solution. Right now there
aren't very many that offer this type of program, however. Be sure to check
off that you're interested in a rental program when you use our search
function to find a provider. The rental program can only be offered to
US-based merchants at this current time.
- Can I use someone else's merchant account to do my transations?
No, this is an illegal practice known as "credit card laundering" or
"factoring." Using someone elses merchant account to do you credit card
transactions can lead to heavy fines and perhaps more.
- I have a swipe terminal for retail sales, and I will soon be
selling online, will my rates be higher as an Internet merchant?
Yes, as an online merchant you will be charged higher rates because the
fraud issue is considered much higher online than it is in the retail world.
The only rate changes you should see are in the discount rate and transaction
fee. Discount rates for Internet merchants range around 2.50% and transaction
fees around $0.30. Fees are different from provider to provider, but in
general you can expect to pay around those terms, maybe even lower. It might
be in your best interest to sell your terminal (if already paid for or the
lease is up) and use the money to upgrade to a Real-Time solution. With a
Real-Time solution you will be able to do transactions automatically when
someone orders from your site and also manually whenever a sale is made at
your retail store. If you also do MO/TO (Mail Order/Telephone Order) the
manual processing would work the same as for retail (face-to-face). Check with
a Merchant Account Provider for details.
- What kind of processing solutions are available?
Real-Time Internet processing, retail swipe terminal, and computer-based
processing. Check out our
Solutions Guide for detailed information on each available solution, and
to help you determine which is best for your businesses needs.
- What credit cards can I accept?
This depends on the provider. The most common cards processed are Visa and
Mastercard. American Express and Discover accounts are also widely available
by almost all providers. Some can even offer Diner's Club and JCB merchant
accounts. Out of US merchants will be able to get a merchant account for Visa
and MasterCard much more easily they can can for American Express and
Discover. In fact, it may be nearly impossible to obtain a merchant account
for American Express and Discover cards if you are located out of the US.
- How long does it take to get my account set up and to start
processing credit cards?
Many providers can have you up and running in a week or less. Some do take
longer, however. If you are an out of US merchant, you can expect the process
to take as long as a month or more.
- When are my funds available?
It will take between 1 to 2 days for money from credit card purchases to
show up in your account. It should never be more than 3 days, though. Some may
even be able to offer same-day funding, however, at the time it's only
available to retail merchants.
Click here
to view our glossary listing on chargeback.
- How long does it take to setup a merchant account?
Usually anywhere from a few days to a week if you are located within the
US. If your outside of the US you can expect it to take several weeks. The
turnaround time frame varies from provider to provider and which banks they
are dealing with in order to get your merchant account approved.
- I lost my merchant account from too many chargebacks, what can I
do?
An excessive number of chargebacks on your merchant account can cause your
Merchant Account Provider to drop you without notice. Once this occurs you are
added to the MasterCard MATCH list (formally known as the Terminated Merchant
File). All Merchant Account Providers have access to this list and if they
find you on here they can refuse to issue you another merchant account. If you
get on the list you may stay on there for several years. But, if you're on
this list there is help. Bank Card Law (
http://www.bankcardlaw.com ) specializes in helping companies remove their
name from the MasterCard MATCH list and educate them on how to virtually
eliminate future chargeback episodes.
For more information on how to reduce and eliminate chargebacks visit our
articles section.
- Are 3rd party credit card processing companies better than
having your own merchant account?
In short, no. Third party services tend to add a cheap and unprofessional
look towards your business. There are also other downfalls to using a third
party processing service such as late funding payments, the hassles of going
through a middleman, and lack of control of payment processing. Third party
services should only be used if you don't have enough capital at the start-up
of your business to support a real merchant account. Once your capital has
grown some it is best to obtain a real merchant account for your company.
- I'm just interested in buying equipment or software, where can I
go to get the best prices?
Four companies that offer both new and refurbished equipment and software
are Bargain
Terminals,
MerchantWarehouse,
POS Credit Card
Machines and
PaymentSource.com . You can actually save bundles by buying your equipment
from one of these companies then obtaining a merchant account elsewhere or
with them. Be aware if you go elsewhere for a merchant account you may be
subject to a programming fee.
- What does "Authorization Only" mean when trying to process a
credit card transaction?
By processing an Authorization-Only (often referred to as "Auth-Only")
transaction, you are simply obtaining authorization for requested charges to a
card, without immediately designating the transaction for batch settlement.
Such a transaction type is useful for merchants who ship products and need to
ensure that they receive all necessary address information. After submitting
authorization only transactions, you can select them for batch. Batch is
nothing more than taking all the credit card orders you completed that
business day and submitting them all at one time, usually at the end of the
business day.
- What does "Capture Only" mean when trying to process a credit
card transaction?
When an authorization code has been obtained for a transaction (e.g. voice
authorization), a merchant can capture these funds using the Capture Only
method. The transaction will then be settled in the next Batch.
- I process transactions using the phone, but my rates are high. What
can I do to lower them?
Your best bet would be to make use of a Virtual Terminal option. Just as
with telephone-based processing you have to manually give credit card
information. A virtual terminal is accessible via any computer connected to
the Internet. You just type in the URL to the login page, enter in your ID and
password and you are securely logged in to complete credit card (and even
check) transactions. Again, I want to make note that transactions are
protected using SSL security. Processing fees for using a virtual terminal
range from 2.30% to 2.50% discount rate and $0.30 to $0.35, depending on which
merchant account service you choose. Monthly fees vary from provider to
provider. Typical purchase costs for a virtual terminal range from $99 to
around $200, again this will vary from provider to provider.
Should you decide to use a virtual terminal solution, another key way to
reduce higher processing fees (and largely reduce fraud and charge backs) is
to collect the 3-digit security code found on the back for Visa, MasterCard
and Discover/Novus credit cards. A 4-digit security code can be found the
front of American Express cards.
-
What is "Independent Sales
Organizations" ?
Most ISOs offer merchant accounts
and the ability to process online credit card transactions in exchange for a
transaction fee and a percentage of sales. Unlike banks, ISOs are generally
more tolerant of high-risk accounts because they are not monitored or as
tightly regulated. In fact, much of their business comes from companies that
cannot obtain merchant accounts from banks directly.
Some ISOs are very reputable; some
are not. Be especially wary of ISOs that do not require you to open a merchant
account. This may be a sign of factoring -- also known as laundering -- in
which you process your orders through a merchant account in the ISO's name
rather than your own, usually for an exorbitant fee.
Factoring is prohibited by card
associations and is illegal in some areas. Not surprisingly, you may have
problems gaining access to your money if you have an arrangement like this and
disputes arise between you and the ISO.
Look out for suspicious rates.
Complaints regarding ISO practices are on the rise. Some ISOs advertise
extremely low discount rates in order to get your business then tack on
undisclosed fees or increase rates without warning. Be wary when you see very
low rates. If something looks too good to be true, it probably is.
Check for a seal of approval. Look
for sites that carry the
Better
Business Bureau Reliability Seal. ISOs must meet specific standards to
use this seal. While sites that don't carry it aren't necessarily fraudulent,
its presence can be a good way to determine whether a company is legitimate.
-
What is Credit Card Processors ?
These companies are responsible
for processing the credit card transactions -- verifying, approving then
transferring funds securely from one bank to another. They are not considered
MAPs per se, as they do not provide merchant accounts. Instead, they form
relationships with banks and ISOs to integrate payment processing with
merchant accounts. For example, many ISOs use the services of the credit card
processors CyberCash and Authorize.NET.
If you establish a merchant
account through a bank directly, you might need to choose between a number of
third-party processors. If this is the case, consider the cost of convenience.
Some companies require you to lease or purchase their equipment and process
orders by hand. Others, like Authorize.net, offer instant verification and
processing via the Web. It's all a matter of business needs and what you're
willing to spend.
Real-time services can be more
expensive, but with all the software and information residing on the
third-party processor's server, the merchant has no hardware or software
issues to worry about, which streamlines the process. This is another area in
which to do your homework. Some credit card processors require extensive
modifications to your site, possibly including programming code.
Finding a merchant account
provider and/or a credit card processor for your e-business can be confusing,
given the flood of them on the market. Your local bank might be your best bet,
but if you get turned down, keep looking and ask a lot of questions,
particularly when it comes to fees and rates. Your efforts will pay off, as
there are affordable and high-quality options available for getting set up to
receive credit card payments on your Web site
The
Inside Information on Merchant Account Providers
How to Find the Best M.A.P. for Your Business |
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| For serious
Internet businesses, selecting a merchant account provider is one of the
most critical decisions you will make. And for companies with unique
e-commerce needs, high monthly revenue intake, or risk management issues,
choosing the right merchant account provider - one that can meet your
special needs, help your business grow, and approve your terms of business
- is a defining "make or break" e-commerce moment.
That's because all merchant
account providers are not alike, and the merchant account you select for
your business can either help you achieve business goals, or, as is too
often the case, hamper your business growth, drain you with exorbitant
hidden costs, and even grind business on your website to a halt.
So you think you've found
the right merchant account? If you've based your decision on an ultra-low
discount rate, free application processing, and guaranteed instant
approval, then you've probably settled for a commodity merchant account
provider who will, in turn, treat you as a commodity - as another faceless
merchant rigged to their system. Any unique business requirements you have
- especially when it comes to eliminating monthly limits or taking time to
underwrite your business fairly - will be overlooked and you will be
forced into a one-size-fits-all merchant account arrangement.
For those businesses
promised instant approval and overnight set-up, you may find that once the
merchant account underwriting department really takes a look at
your business model and credit history (two weeks later), your approval
could be revoked or you may find yourself saddled with an entirely new
fee, rate, and policy structure - one that can make life on the Internet
very difficult.
When it comes to merchant
accounts (and e-commerce solutions in general), hasty, uncritical
decision-making will backfire every time. The key here is to slow down and
talk with an e-commerce provider about your specific needs, short-terms
expectations, and long-terms goals so you receive the right merchant
account for your business - one with merchant-friendly policies that will
support, not sabotage, your e-commerce campaign.
Unfortunately, too many
merchants are lured in by too-good-to-be-true discount rates and instant
approvals, only to later have their business paralyzed by too low monthly
limits, inflexible policies, long-term lock-in contracts, as well as
"undisclosed fees" and "add-on costs". It follows that when you in are in
dire need of assistance, you may discover that your merchant account
provider's customer service department is a message machine, an e-mail
address, or an infinite loop of hold Muzak.
As an example of what can
happen with commodity merchant account providers, let's take a look at
chargeback policy. With many Internet merchant accounts, if you receive a
single chargeback, the merchant account provider will turn around and hit
you with a chargeback fee and then impose limits on your revenue intake
and begin holding your money. That's a rolling chargeback reserve - one
that can freeze a large slice of your proceeds for up to several months on
a continuing, rolling basis.
Often, merchant account
providers implement a reserve or chargeback rate from the outset of your
relationship, denying you a percentage of the revenue your business earns
from day one. Even more common is the extremely dilatory fashion in which
money is transferred from your merchant account (essentially a clearing
house) to your own business bank account. Many providers are notorious for
sitting on your money long, long after your transactions have settled.
Other major, very common
complaints about merchant account providers revolve around the arbitrary
monthly limits that frequently shut transaction processing down, usually
just as a business is hitting its stride. For businesses that expect to
transact a moderate to high volume of revenue per month, these limits can
literally paralyze your business - and there is no guarantee a limit will
be raised to your satisfaction, or without other penalties, or even in a
timely fashion. Again, 'intangibles' like customer service really do
count.
The irony in all of this: In most cases, merchants suffering from
discount-rate tunnel vision will spend a great deal of time wrangling over
a tenth of a percentage difference in a merchant account rate without
realizing that this slight difference adds up to 10 cents for every 100
dollars processed. The question these merchants may want to ask themselves
is: Do I want to jeopardize the success and long-term scalability of my
business for that tenth of a percent difference? Is the perceived gain of
landing a low-rate merchant account more important than a having one that
actually serves my business well?
Clearly, all merchant
account providers are not equal - and despite the many fly-by-night
providers and ISOs, there are also providers out there offering flexible,
merchant-friendly policies with competitive rate structures. Of course,
these providers use far less aggressive marketing tactics, they don't make
outlandish promises, they will not approve you overnight, and they may
possibly charge you a nominal fee to process your application. However,
these providers will work with you to establish a flexible, custom-fit
solution that won't restrict your business or entangle you in a web of
fees.
Working with a payment
processing company to obtain an integrated merchant account and e-commerce
solution is also a sound strategy, and many payment gateway companies work
closely with merchant account providers - and their underwriting
departments - to help their clients acquire a suitable merchant account.
In fact, it's in their interest to do so as a payment-processing gateway
company.
Here, businesses seeking to
avoid monthly limits and rolling reserves, as well as businesses with
higher-risk models may find merchant account relief working through an
established, security-minded gateway company. Why? Because the merchant
account underwriting and risk assessment results will already be leveraged
in your favor due to the transaction security and anti-fraud protocols
utilized by the credit card processing company. Under these circumstances,
security (AVS, CVV2, Negative Database Checking), as a major component in
the risk assessment equation, is a known and controlled variable.
Therefore, as a client of the processing company, you can enjoy the
benefits of their existing relationship with the acquiring merchant
account provider.
The point is, if you want
to differentiate merchant accounts by discount rate (essentially reducing
your selection criteria to a commodity pricing logic) then you'll get
precisely what you pay for: a cookie-cutter solution. If your business
wants more from a merchant account, and you have individual needs, then
selecting a merchant account should also be based on criteria like policy,
reputation, and customer service. And with the latter, there's no reason
you still can't find a solution with competitive rates, as well as
generous monthly limits, no rolling reserve policies, chargeback rates, or
surprise fees.
As in any industry,
merchant account providers have hard costs associated with their business
and they need to make money somehow, somewhere. Ultra-low rates and
instant approval do not signal acts of charity and good will towards men
and, if anything, should be eyed with suspicion as an indicator of other
merchant account pitfalls. Look before you leap. In the final analysis, it
will be the policies and quality of your merchant account provider - not a
few tenths of a percent difference in discount rate - that will determine
the scale of your e-commerce success.
Jane Pepperin is Webmaster at
Early-Pregnancy-Tests.com
-- An Internet business using old-fashioned business values to succeed.
Contact Jane at
support@early-pregnancy-tests.com! |
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