By Aaron Spitzer, Contributing Author
If you still haven’t decided whether to accept credit cards through your Web site, the facts speak for themselves: Marketing studies show that you’ll lose 60% of your potential orders if your Web site is not set up to accept credit cards. Not only will you receive more orders, but also those orders will be substantially larger. Credit cards enable impulse buying, reassure customers of your legitimacy, and simplify your billing.
To accept credit cards, you must establish a merchant account. Your merchant account provider (MAP) will verify the credit card, process the transaction, and deposit the results into your account, usually within 2 to 4 days. In exchange, your MAP will charge you some combination of setup fees, transaction fees, and discount rates (a percentage taken from each order). These costs can add up, especially if your MAP requires a monthly minimum.
Assuming that you’ve decided to accept credit card orders, let’s walk step-by-step through establishing a merchant account:
Determine Your Needs
Not every product sells the same way and not every merchant account provider charges you the same way; choose a provider that suits your business. Begin by considering the nature of the products you sell – are they large and expensive? Perhaps then you ought to seek a MAP that offers a higher flat-rate transaction fee and minimizes the discount rate, since even a hefty $1.00 (U.S.) transaction fee will be far lower than a 2.5 % deduction from the charge. On the other hand, if you rely on small, high-volume sales, even a $.30 transaction fee can erase your profits.
Also consider cost versus convenience issues. Many MAPs will require you to lease or buy a credit card terminal and process orders by hand. Others allow for instant verification and processing via the Web, but not surprisingly, these services are often more expensive. For some products, such as memberships or access to resources stored on the Web, instant verification is especially important – a potential customer who wants to peek inside may be discouraged if required to wait for manual processing.
Examine Your Resources
Different MAPs also require different desktop interfaces on your site. If you plan to manually process your orders, a secure Web form will be good enough. For instant processing via the web, however, some MAPs will require extensive modifications to your site, including programming code. If you don’t program or haven’t hired a programmer, you may find some card processing systems too complex to use. Be sure to ask about these requirements when seeking an MAP.
A number of providers are now offering simplified, comprehensive systems which include a “shopping cart” program, order verification and processing, and automated shipping orders straight to your e-mail account, so don’t feel you need to bite off more than you can chew. If you’re willing to pay their fees, there are MAPs suitable to every level of web authoring ability.
Ensure Your Security
Credit card information is extremely sensitive, and plenty of villains are waiting to exploit any breach in your security. You must reassure your Web customers that their secrets are safe by processing their orders through a secure server, which encrypts the data exchanged in processing their orders. The current industry standard for secure servers is SSL (Secure Socket Layer), but Visa, MasterCard, and several major banks are developing an alternative system called SET (Secure Electronic Transaction). If you are setting up for instant verification, ask potential merchant account providers about their security systems. If you process your orders manually, you’ll need to provide SSL on your own server (ask your Web site host about security if you do not operate your own server).
Research Your Options
If you’ve had trouble finding a MAP that will accept Internet business, have no fear; there are hundreds of MAPs out there willing to establish merchant accounts for Internet businesses, and more are joining the market all the time. You can find dozens of providers with a keyword search for “merchant account” on the major search engines.
Merchant account providers may have other hurdles besides their fees. Many MAPs refuse accounts with startup firms or firms and individuals with bad credit histories; be prepared to have your prospective MAP probe into your background. Many MAPs have also established minimum annual revenue requirements, sometimes as high as $1 million (U.S.). Some MAPs also require security deposits or revolving accounts to ensure that you’ll pay for any charges that are contested.
Since providers are likely to check up on you, be sure to check up on them. Research the business history of your prospective MAP . While the vast majority are legitimate, there are still plenty of scams. If your current bank accepts merchant accounts from Internet businesses, they may be a convenient choice. MAPs are generally either banks or independent service organizations (ISO). Banks offer greater security and stability, but are picky about their clients and generally charge higher fees. ISOs are more tolerant of high risk accounts, but are not monitored and regulated to the same extent as banks, and may be somewhat less dependable.
Be especially cautious about ISOs that do not require you to open a merchant account. Many of these services offer to process your orders through a merchant account in their name, not yours. It may be difficult to access your money if there are any disputes between you and the ISO.
Choose Your Provider
The numbers vary, but most merchant accounts charge somewhere between $0.20 and $0.50 per transaction, with a 1.5%-3.0% discount rate. Add to this a couple of hundred dollars for setup, another $50-$80 for leasing a terminal, and something like a $20-50 monthly minimum. Make sure you cover all possible expenses in choosing an MAP. Transaction fees and discount rates are your most obvious expenses, but be sure to ask about chargeback fees, programming charges, setup fees, and monthly minimums as well.
Be sure to negotiate all of these numbers – merchant account fees and charges are not carved in stone. If you’d like to stick with your current bank, approach them with examples of lower fees elsewhere and they’ll likely lower their fees to keep your business.