WEBSITE MERCHANT ACCOUNTS
The Lifeblood of the Internet Is Digits. You Need to Be Able to Be Paid in Digits. You Need a
Merchant Account for Your Website.
Website merchant accounts make e-commerce possible. In order to be able to
sell effectively online, you must be able to accept a credit card.
If you don't have the ability to accept payment through a credit card, studies have
shown that you will likely lose between 60 and 80 percent of your potential sales transactions. You need to
have a merchant account so that you can accept such payment. Here is what you need to know:
Website Merchant Accounts: What Are They?
A merchant account is a
specific type of bank account that gives the account holder (usually a business) the ability to accept
credit card and debit card payments. They are usually obtained through a financial institution such as a
bank, or through a third-party provider.
Merchant accounts are
also an agreement between a seller, a bank, and a payment processor. When someone uses a credit card, the
payment is processed through the account to the seller or retailer. The process is settled according to
the agreed upon terms governing the merchant
In general, e-commerce and
online businesses will use a payment gateway that is separate from the merchant account provider (although
some account providers do provide payment gateways as well). Payment gateways will allow you to
login to a secure virtual terminal and manually enter credit card information and/or interface the shopping cart
feature of your website directly in order to process credit card orders as they are
Whether you get an account
through a bank or other processor, they will provide several services. They will verify the customer's credit
or debit card, process the transaction, and deposit the resulting revenue into your account (after they remove the
associated fees, of course). The entire process can take anywhere from 1 to 4 days, on
Website Merchant Accounts: Benefits
The biggest benefit of having a merchant account is that it
allows you to offer convenience to those who would like to buy from you. This helps you make more
sales. You should always do everything you can to make it easy for people to buy from you.
Additionally, the merchant account makes selling easier. Of
course, you pay for the convenience, but the process can be automated on your end. Less paperwork is
better than more paperwork. This frees you up to worry about serving more people and making more
A merchant account also helps establish your legitimacy
online. The MasterCard and Visa logos are still considered to be one of the marks of a legitimate
bricks-and-mortar business. The same is true for internet businesses.
Having a merchant account also lets you sell
to two very important demographics: impulse buyers and international buyers. The majority of humanity
lives outside of your country, no matter where you live. The ability to accept credit cards opens the door
to selling to the entire world. That is a lot of people you wouldn't otherwise be able to sell to or
serve. The impulse buyer is also going to spend money on your website or blog if you accept credit
cards. Help both groups out!
Website Merchant Accounts: Analyzing Them
It is important to analyze the different website
merchant accounts you are considering before choosing
Most merchant account providers will charge you a
variety of fees for a variety of different things. Some charge a setup fee, and some don't. Some charge
a higher flat fee and a lower discount rate (good for someone selling high-priced goods or services). If you
make a living selling a high volume of low-priced goods, even a moderate transaction fee could kill any profits you
might otherwise have seen. So, read the fine print. Know your business and analyze the options.
Choose one that allows your business to be as profitable as
You should also evaluate merchant account providers on
the basis of security. Know how your account provider ensures transaction security. Know how they
protect against fraud. Make sure that they have saveguards in place to protect consumers that purchase from
you using their credit cards.
Website Merchant Accounts: Technical Requirements
Be sure to understand your
technical requirements prior to getting a merchant account. Different providers will require different
gateways to be placed on your website or blog so that credit card information can be tranmitted to your bank's or
processor's authorizing agent for verification.
It is almost always best
to automate when you can, so you should probably use a payment gateway. Make sure your selected account
provider's gateway works on your system. And, some providers don't even allow transactions originating from
the internet. Make sure yours does if you don't want to enter every transaction by
If, for some reason, you
are planning on entering all orders by hand, all you really need in addition to your merchant account is a secure
web form where people can enter their orders.
Website Merchant Accounts: Chargebacks
Beware of chargebacks. Federal law protects credit card
users from fraudulent transactions. A consumer is only on the hook for a maximum of $50.00 if their credit
card information is stolen and used illegally.
Banks don't want to be on the hook either. So, what do you
think happens? They pass the loss on to the unprotected merchant (you). The bank will charge the
merchant's account for the fraudulent charge. This is called a "chargeback" or "bill back."
And, to add insult to injury, a lot of merchant account providers
will add anotherpenalty fee on top of the chargeback. Needless to say, chargebacks can wipe out your
wealth rather quickly. Make sure you know how your provider handles chargebacks for website merchant
accounts. Then, take steps to protect yourself and your business.
Website Merchant Accounts: Options
All of these options are ways that you can
accept credit cards. However, not all are true merchant accounts. PayPal, for example, is not a true
merchant account provider. It can, at its discretion, lock your account. This has happened to me
personally. It took quite a bit of time before I proved to them that I am who I am. During any
stretch of inability to collect payments or manage your accounts, you could lose a lot of money and
If you go with one of the third-party
facilitator services (like PayPal), you should get a backup merchant account from a bank or other financial
institution. That way, if PayPal ever decides they hate you, you'll have a backup option that will keep
your website or blog fully functional while you sort things out with PayPal.
Here are some of the options that will allow
you to take payments by credit card:
Local Bank - If you decided
to Create a Business Entity to shield your assets and provide liability protection and
tax breaks (recommended), you should set up a separate bank account for the business entity. Check
with the bank where the account is to see if their merchant accounts are a good solution. Since your
account is with them, you can often get free accounts/setup or slightly reduced fees.
Amazon - Amazon.com is one of the
biggest online retailers in the world. You can find just about everything on their website. If
you want to sell products on Amazon, you can sign up for an
Amazon WebStore. This will allow you
create a customizable store front as your website. If you chose to Register Your Domain Name, you can associate the domain with your store front. This
costs $59.99 per month. For $99.98 you can sell on the main Amazon site as well. Both
plans include the first month free.
PayPal - PayPal is not a true merchant account
provider, however, they provide a valuable service. Their rates are reasonable, and they are trusted
by millions. By signing up for a Business or Premier account, you'll be able to accept
credit cards through their service. It would be wise to get a real merchant account from your bank,
however, in order to have a backup option if PayPal acts up and freezes your account. Their rates are
between 2.2 and 2.9% with an additional $0.30 charge per transaction. There are no monthly
fees, setup fees, cancellation fees, or monthly minimum fees. If you don't already have
a separate PayPal account for your business, you should probably get one.
Google Checkout - This is Google's version of PayPal,
essentially. Their rates are also very reasonable, ranging from 1.9 to 2.9% with an additional $0.30
charge per transaction. There are no monthly, setup, or gateway fees. Google Checkout also has a
Payment Guarantee that protects 98% of transactions against fraud. On a guaranteed order, you get paid
even if it results in a chargeback.
ProPay - ProPay is another PayPal competitor, albiet a
more expensive one. Their fees range from 2.69 to 3.75% with an additional $0.25 to $0.35 charge per
transaction. There is an annual fee ranging from $34.95 to $299.95, depending on which plan you
choose. There are chargeback fees in addition to the chargeback. Multiple other fees are
assessed as well.
Kagi - Kagi is another option, but more expensive than
PayPal. Their fees range from 1.9 to 5.0% with an additional $0.30 charge per transaction.
Additional Kagi service fees are also assessed at 2.5% plus an additional fee per transaction ranging from
$1.00 to $5.00.
CCBill - CCBill takes care of order processing,
customer service, access management, and risk management issues for you and your website. There are no
setup costs, contract obligations, or hidden fees. They charge a flat percentage based on transaction
volume. If you have 5,000 or less transactions per week, your flat rate is 14.5%.
As your transactions increase, your rate goes down. For 50,000+ transactions a week,
your rate would be 11.5%. Discounted rates are available if your website is hosted by
Cavecreek Wholesale Internet Exchange.
Website Merchant Accounts: Conclusion
My recommendation for reliability and security
is to get a merchant account through your bank (preferably the one that hold your business accounts) and a
PayPal account for your business.
Although all the options listed above are
functional, PayPal is tremendously popular. It has a good reputation, and people trust them. It is
also easy to use. Get it, use it, but don't put all your eggs in the PayPal basket. Have a backup
option. If your website becomes profitable and highly-trafficked, even an hour of PayPal lockout could
cost you a lot. Have a backup plan.
Keep moving. It is time to prepare for liftoff.
Testing Your Website comes next.
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