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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?     Website Merchant Accounts Define

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 account.

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 made.

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 average.

Website Merchant Accounts: Benefits     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 sales.


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     Website Merchant Accounts Benefits

It is important to analyze the different website merchant accounts you are considering before choosing one.

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 possible.

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     Website Merchant Accounts Benefits

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 hand.


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     Website Merchant Accounts Benefits

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     Website Merchant Accounts Benefits

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 business.


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 - 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     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.



Copyright © 2009-2010, Issachar Knowledge, LLC: Website Merchant Accounts


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