List Categories | List All Articles | List Articles By Title
Choosing An Internet Merchant Account
Surf to Google and perform a search on "Internet Merchant Account". The results are staggering (472,000 results!) If you have created a web based business and need to accept credit card payments, your choices are limitless. Before you partner with a provider, take time to understand the different components of internet credit card processing, and know what to look for in a merchant provider.
How It Works
Accepting credit card payments through your web site actually requires multiple components. Between a paying customer and your bank account, three layers exist:
Payment Gateway - This is the code that will transmit a customer's order to and from an internet merchant account provider. The payment gateway provides you the ability to accept customer billing information (credit card number, credit card type, expiration date, and payment amount) and the necessary validation steps that must be followed before the credit card is actually billed.
Internet Merchant Account - A Merchant Account is an account with a financial institution or bank, which enables you to accept credit card payments from your clients. The payment gateway actually transmits the billing information to the internet merchant account provider. Unfortunately, most local banks do not provide internet merchant account capability.
The main reason why most local financial institutions or banks do not want to provide online merchant accounts is because transactions conducted over the Internet are totally different from face to face transactions where a signature is required to authorize the purchase. This makes online transactions prone to credit card fraud. Fraud protection should be one of your primary considerations when choosing an internet merchant account provider.
Web Site - Regardless of which merchant provider and gateway service you choose, your web site will need to integrate with your service providers. Most providers include detailed web integration instructions.
How Much Does It Cost
Understanding the total costs of your merchant provider can be tricky. Remember my Google example - there are more merchant account providers than there are people looking for internet merchant accounts so ask questions and be picky! Typically, an internet merchant account will have three types of costs:
Let us discuss each type of cost:
Up Front Application Fees
Many internet merchant accounts will require an up front application fee. This fee, supposedly, is to cover their costs for processing your application. In case you choose not to open an internet merchant account, they still cover their initial costs. Although common, many providers waive these fees and I recommend that you choose a provider that does not require an up front fee.
On Going Fixed Fee
Most all internet merchant providers require a monthly fixed fee or "statement fee" as it is commonly named, which is simply another way to cover their costs and make money. You will be hard pressed to find a provider that does not require this type of fee on a monthly basis. However, do not choose an internet merchant account that requires more than $10 per month. Additionally, most internet merchant providers require a monthly minimum (usually $25). The bottom line is that you will be paying at least $25 per month (on top of the monthly statement fee) for your account.
Usually, the discount rate will be between 2 and 4 percent. The discount rate is the sales commission the provider earns on each sale. For example, if the discount rate offered is 3%, and you receive a sale over your web site for $20, you will owe 60 cents to your internet merchant provider.
Fixed Transaction Fee
Usually between $0.20 and $0.30, the fixed transaction fee is the fixed fee portion of each sale. Unlike the discount rate, the fixed transaction fee is the same for every transaction. Whether you get a $1 sale or a $100 sale, the transaction fee will be the same.
A bit more hidden in the small print, a termination fee can apply if you cancel your merchant account within a specified period of time (usually within one year). But beware, some merchant providers require a three year commitment!
If a customer requests a refund and they want their credit card credited, an internet merchant provider will charge you a separate fee (usually between $10 - $20). Read the contract carefully, as other special fees may apply.
Putting It All Together
Now that the different fees have been explained, let us look at an example set of transactions to help understand what an internet merchant account may cost your business on a monthly basis.
I have created a simple formula to help you calculate your monthly charges:
Total Charges = Statement Fee + Number of Transactions x (Average Sale x Discount Rate + Fixed Transaction Fee) + (Number of Chargebacks x Chargeback Fee)
For example, let us see you sell widgets over the internet. The sales price for each widget is $10. You typically have 100 sales per month and about 5 people request refunds (chargebacks). For this example, let us assume you have signed up with Jones&Jones internet merchant account services and have the following terms:
Discount Rate - %2.5
Using my formula above, your monthly Jones&Jones charges will be:
Total Charges = 10 + 100 x (10 x .025 + 0.3) + (5 x 15) = $140
You can calculate your monthly sales revenue by multiplying your sales volume by your price:
Monthly Sales Revenue = 100 x $10 = $1000
Your internet merchant provider is costing you %14 or your total sales.
Making Your Decision
Before you choose and internet merchant provider, understand all of the cost components. Use your current or projected sales data to forecast what your internet merchant account costs will be. Planning ahead can save you time and money.
About The Author
Andy Quick is co-founder of Findmyhosting.com (http://www.findmyhosting.com), a free web hosting directory offering businesses and consumers a hassle free way to find the right hosting plan for their needs. Feel free to contact Andy at firstname.lastname@example.org in case you have any questions or comments regarding this article.
How To Turn Any Product You Sell In To Residual Income
The concept of this is for you to offer a subscription type product as an upsell or backend product. For example, if you're selling an ebook for $37 offer a subscription to a related e-zine for $9.
Selling Globally Through a B2B Exchange
Participation in B2B Exchanges is increasingly becoming one of the fastest growing marketing methods for businesses looking for augmenting their client base beyond their local markets. Any good B2B Exchange offers direct contact with thousands of prospective buyers in a single location.
Intranet Project Names - Some Ideas
"What's in a name? That which we call a rose By any other word would smell as sweet."In this famous quote from Act II of Romeo and Juliet, Juliet tells Romeo that a name is an artificial and meaningless convention, and the fact he is a Montague and she a Capulet (warring families) means nothing to their love.
Your Site is all Direct Marketing
This may not be a popular view, but I think writing a web site is very similar to writing a piece of direct mail. I'm not talking about smash-and-grab fliers.
Three years ago I was doing some work for a local university helping to redesign an internal website they wanted updated and made more user friendly. When the job was done the person I was doing the job for wanted to use his school issued credit card to pay for my services.
Shopping Cart Features to Consider
Often the simplest Web stores have the most success. But shoppers like special features depending upon the type of store you have, how you market and use them, and if you don't overwhelm the shopper.
Online Payments Make It Easy For Your Customers To Buy
In the last column we discussed the process of credit card enabling your brick-and-mortar business. I pointed out that research has shown that accepting credit cards can help increase revenue and speed up cash flow.
Say Something Worth Talking About
I recently published a short e-book called 'One Thing I Know About Doing Business Online'. Seventeen people contributed - including Seth Godin, Jeffrey Zelman, Danny Sullivan, Jared Spool, Gerry McGovern and Ann Handley.
Ecommerce Solution for the Big and Small Business
First off, you need to know what an ecommerce solution is. An ecommerce solution can be defined in many ways.
Drop-Shipping - A Great Way of Making Money Online
Using the Internet to sell products and services to ever increasing number of net users is a good way to start your own business. If you are not taking advantage of this great opportunity you are just missing the boat! Consider this: e-commerce, contrary to popular believe, is thriving and increasing at a double digit growth rate.
The Census and the E-Commerce Wave
Understanding business and product sales can sometimes put me in a whirlwind. My job tends to get me involved with loads of different opportunities dealing with all sorts of product lines.
Intranet Portals - Collaboration through Team Rooms
Knowledge Management for beginnersKnowledge Management (KM) can be defined simply as the process through which organizations generate value from their intellectual and knowledge-based assets. Knowledge assets are often grouped into two categories:(1) Explicit Knowledge Generally, everything and anything that can be documented, archived and codified.
How To Start An Internet Business - Site Layout
The fourth step of how to start an Internet business involves the layout of your site. When organizing it, two audiences must be considered.
How to Start a Business on the Internet
So you want to start a business? Good for you. Really, I mean that sincerely.
Coupons & Rebates
Yes, it's true, coupons are not just for newspapers anymore. Not to be a downer, but I personally hate the things.
Direct Marketing isn't all Brute Force
There are so many metrics surrounding direct marketing. So many facts, figures, test results and other sundry measurements.
Online Consumers - What Are They Complaining About?
For many businesses, e-commerce represents a tremendous method for generating revenues. To maximize the profit potential, you need to keep an eye on issues that drive your prospects nuts.
The House Of Print.Com
Publishing has always been a difficult business to promote successfully, which titles by which authors to promote, which genre, will it be fiction or non-fiction? Will they sell? Will they make money, both for the publisher and for the author? So many questions which there is no definitive answer and so the publisher takes a chance with his money and his time and resources and decides on which books to publish, promote and distribute to the bookshops. He may only distribute to bookshops in his own country and if they don't sell well enough, will not be seen by anyone else in the world.
7 Key Steps To Reduce Refunds and Chargebacks
One sure-fire way to loosing out big time on your business profits is from incidences of excessive refunds and chargeback requests. If the number is high in any period you could risk loosing your third party merchant account altogether.
Electronic Commerce and WTO
The Internet may not be useful for all businesses, nor do all have to develop an Internet information strategy. Some businesses are concerned with the start-up costs of connecting such as purchasing hardware and software, subscribing to an Internet connection or service provider, and training staff.
home | site map
All articles are copyright to their owners.
Note: this website lists articles, We do not Write Articles !