Shop around for a credit card processor that best suits your needs. Talk to several different processors and don't be afraid to ask questions. Find out about:
- The discount rate: The percentage of each transaction paid to the merchant account provider. If your monthly charges are less than a certain volume, the processor may charge a higher percentage.
- Transaction fee: A flat rate charged for each transaction processed.
- Equipment: Some examples include point-of-sale terminals, printers and peripherals. Also find out about installation costs. (This may or may not apply to you as an e-business.)
- Monthly minimum fees: These are minimum fees that the merchant account provider collects each month from the merchant if the merchant's discount rate and transaction fees don't add up to the monthly minimum specified on the original merchant application. It is usually about $25 per month if the monthly minimum volume isn't reached.
- Reserve fees: If your credit history is in question, or if you own a new or high-risk business, you may be required to set up a reserve account, which protects the processor from any future losses. The reserve account is calculated as a percentage of your sales.
- Chargeback fees: These are the costs charged by a processor to cover disputed charges.
Other Payment Options
- Money orders. For customers who don't have credit cards, money orders are a great payment alternative, particularly if you sell your products in an online auction environment, such as eBay. Services like BidPay.comallow your customers to purchase Western Union-branded money orders with their credit, debit or charge cards. BidPay.com then sends the money orders to you, along with e-mail notification that your customers' payments are on the way.
- Existing checking accounts. Services that transfer checking account funds electronically are another quick and easy option for customers without credit cards. Western Union's MoneyZap service, for example, lets buyers pay merchants online from their existing checking accounts.
- Check cards. Offline debit cards--aka check cards--are typically issued by large credit card companies through their participating banks. U.S. consumers today make the majority of their offline debit purchases with the Visa Check Card or MasterCard's MasterMoney card. These enhanced ATM cards carry the Visa and MasterCard logos, respectively, and may be used everywhere the credit cards are accepted, including over the internet.
Customers who make check card purchases in the physical world sign drafts that authorize merchants to charge their accounts. On the Web, customers enter check card information into browser-based forms, just as they would if they were making credit card purchases. The data is encrypted, captured by the transaction processor's secure payment gateway, and sent to the credit card processing networks for authorization. Transactions normally settle in two to three business days.
- Electronic checks. These are another emerging e-payment option. Through a process called check conversion, brick-and-mortar merchants can transform their customers' paper checks into electronic transactions that are processed through the automated clearing house (ACH) network. Funds are automatically deposited into their merchant accounts, usually within 48 hours. To perform check conversions, a store owner must have an account with an electronic-check service provider as well as a magnetic-ink character recognition (MICR) check reader or a payment terminal that supports check conversion.
- Internet checks. You can also accept checks over the internet using payment-processing software, such as LinkPoint International's VirtualCheck. Customers who elect to make check purchases from a website are prompted to key their information into a browser-based form. Again, data is encrypted and captured by the transaction processor's payment gateway. Funds from approved transactions are debited from customers' accounts and transferred via the ACH network into merchants' accounts in 10 to 14 days. Merchants can enjoy peace of mind as well as convenience if they use check-guarantee services when they process internet-checks.
- PayPal. Based in Mountain View, California, PayPal is the world's largest online payment system. Recently acquired by eBay, PayPal lets consumers send money to anyone with an e-mail address through their credit card or checking account. Consumers sign up once for the free service-after that, they use their account number to buy products online securely, conveniently and cost-effectively. The cost-effectiveness of PayPal for e-tailers is demonstrated in several scenarios. For example, if entrepreneurs have sales of $250 per month, they pay a credit card company about 35 percent of every transaction, and if that number goes up to $7,500 per month, they only pay about 5 percent. But PayPall always charges 3.3 percent, says a Gartner vice president. It's also easy to use. A merchant adds PayPal's "Web Accept" button to its site; customers then click on the button and pay with their PayPal account. The payment is processed and sent directly to the merchant's account, then the customer is returned to the website.