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How To Choose A Good Merchant Account
Author: Alyice Edrich
Ecommerce businesses need to accept credit cards in order to succeed and compete with other online competition. If you don't accept credit card payments, your business will not succeed!
Over 95% of all online business transactions occur because credit cards offer a sense of payment security. While consumers are leery of sending personal checks to someone they don't know—across the internet—the dangers really occur when you accept a personal check as payment for your goods or services; especially from someone you have never done business with.
Accepting a personal check doesn't guarantee lower banking fees. In fact, you aren't guaranteed that check will ever clear the bank. With bounced check fees as high as $25 per check, not counting the downward spiral effect (should you not have a cushion in your checking account to cover that "bad" check), accepting personal checks could end up costing more than a merchant account.
But getting approved for a merchant account is not always easy, and even if you do get accepted, can you really afford the fees?
Besides the basic requirements of opening up a business checking account, the terminals alone can run anywhere from $160 to several hundred dollars. On top of that one-time fee, you still have to pay a monthly usage fee (known as a gateway fee), a per transaction fee (usually 30 cents each), and percentage per charge free (usually 2.5%). Some companies even charge you money if you don't receive a certain dollar amount in business per month, to receive a monthly statement, or to receive a check versus an auto-deposit of your earnings.
So how does a small home-based business compete with the big boys?
By using go-between companies that accept real-time payments and low transaction fees. Or hunting around for an affordable merchant account!
Finding a company that allows your customers to pay by secure server (https://) and by various payment options (American Express, Debit Card, Discover, Mastercard, Visa) is a much better solution for your company.
Ask Questions
Just make sure that you fully understand the terms and conditions of the company you choose to use for your merchant account, ask each company:
- What are the fees?
Terminal fee, statement fee, application fee, start-up fee, software fee, gateway fee, monthly usage fee, etc. - What are the per transaction fees?
- Do they charge a percentage of every order as well?
- When will you receive payment for goods sold through that merchant account? Most merchant accounts will send your money at the end of the day, the day of the sale.
- What is the chargeback policy?
- What are the chargeback fees?
- How does the company handle customers who claim they did not authorize a purchase, when they have the product in hand?
- Will the company fight for you, or simply take the word of the customer?
- How does the company protect you, the merchant, from fraudulent charges?
- Is there a minimum or maximum number of charges you must receive each month?
- Will the company charge you a fee if you request payment by check and not direct deposit?
- Under what terms will the company freeze your account and hold your funds?
- How will the company protect you against credit card fraud?
- If using the merchant account for internet orders, how will the company notify you when an order comes in?
- How soon with the company notify you that the order was made and will you be given complete details about the order?
- Will you need to purchase a separate shopping cart system or does the merchant account come with one?
Alternatives To Merchant Accounts
Before working with any go-between, or third-party, credit card processing company, do a search online or ask others who use that service what they have heard about the company you are interested in using.
- What's the worst case scenario?
- What's the best case scenario?
- Should you only use the company to get your business started and off the ground?
- Should you continue to use the company over the long-haul?
- How does that company handle charge backs?
- How does that company handle disputes from buyer claiming product was never received, not authorized, etc.?
Make sure the third-party processor uses a secure credit card processing center. And find out what happens to your money should the company fold before it has had a chance to pay monies due you.
Merchant Account Alternatives
2CheckOut.com
2checkout is an affordable way to take credit card transactions, but you must wait to receive your money. The company pays it's merchants on the 1st and the 15th of each month, and you will not find the funds in your account until approximately five days later. And they hold a percentage of your sales for three months as a reserve.
2 Check Out requires a one-time fee of $49, has a low 45 cent per transaction fee, and high 5.5% transaction amount fee.PayPal.com
Paypal is a a good company to start your business with if you cannot afford a merchant account, but once your business begins selling products and/or services in the thousand dollar range, it may be time to look for a more cost-effective merchant account. You receive your money as soon as your customer pays you and the fees are low.
Your customer can pay by checking account or credit card. Paypal offers a free shopping cart, no set up fees, a 30 cent transaction fee, and a 2.9% transaction amount fee. The drawback; however, is they are a membership-based company. In order for your customers to purchase your products, your customers must join Paypal (which is free).ClickBank.net
Click Bank offers sellers of digital products a way to collect payments and sell through affiliates. There is no monthly fees and uses real time stats. Click Bank handles the payment process of paying affiliates who have sold your electronic goods.
Click Bank charges a high 7.5% transaction amount fee, plus $1 per transaction fee. It also charges a $2.50 per check fee to receive your own money.E-Junkie.com
E-junkie offers sellers of digital products the ability to sell digital products and even offer downloads of music. There is a monthly service fee based on the number of products you sell, but there is no limit on how many orders you can receive.
E-junkie charges a low monthly fee and that's it! Fees start as low as $5 and go as high as $159 per month. E-junkie also integrates with Paypal, Google Checkout, 2CheckOut, and Authorize.net.PayLoadz.com
PayLoadz uses Pay Pal as it's merchant account. If you sell under $250 per month in digital products there is no fee to use this service. As your sales increase, so do your monthly fees for using Payloadz service. Fees start at $15 and go as high as $500.
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