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Accepting Payments

Go traditional with credit card acceptance or explore one of the many payment alternatives.
March 29, 2006

The number-one question on the minds of new website builders is, How do I arrange to accept credit cards for payments?

A good first place to start your search for merchant status is your own bank. Most issue credit cards, and if you have a long-term relationship, that's a big plus. Your bank says no? Try a few other local banks--offering to move all your accounts--and you just may be rewarded with merchant status.

You may also try other companies that specialize in issuing accounts to online merchants, including:

Or log onto Google and search for credit card processing. You'll find many dozens of outfits, large and small, that are on the prowl for startups seeking merchant accounts.

Credit cards aren't processed cheaply, however, at least not for a startup. A typical fee schedule for a small-volume account (fewer than 1,000 transactions monthly) would include startup fees amounting to around $200 and monthly processing fees of around $20.

Making Customers Feel Secure
The one must-have for online credit card processing: secure, encrypted connections. You've seen this many times yourself. Go to virtually any major e-tailer, commence a purchase, and you are put into a "secure server" environment, where transaction data is scrambled to provide a measure of safety against hackers. Truth is, these worries are generally unfounded--the odds of a hacker grabbing an unencrypted credit card number from a nonsecure website are pretty slender--but buyers feel reassured when they see they're entering a secure site, and that means you need to provide it.

Is this a technical hassle for you? It shouldn't be. Whatever vendor sells you credit card processing should also, as part of the package, provide a secure transaction environment. If they don't, look elsewhere.

Fraud Prevention Tools
Contrary to reports of rising fraud rates, credit card payments remain one of the safest payment methods available online. Sophisticated internet solutions, such as the LinkPoint Secure Payment Gateway, process credit card payments in real time using Secure Sockets Layer (SSL) technology, which encrypts all confidential information during the transmission and authorization of transactions.

Other fraud-prevention tools, such as the Address Verification Service (AVS), make online credit card acceptance even safer. The service compares the numerical information in your customers' addresses with records stored by card-issuing banks. It then returns codes that indicate whether the numbers match. Although the information provided by the AVS does not affect the authorization of your transactions, it can help you make informed decisions about suspicious orders.

Besides the AVS, you can protect yourself by using the card validation code 2 (CVC2) and the card verification value (CVV2) verification systems of MasterCard and Visa, respectively. These verification services use the three-digit codes printed on all MasterCard and Visa cards to help you determine whether your customers possess legitimate cards.

Special e-Considerations
Be sure to ask prospective processors about the costs of storefront solutions that you must have to effectively operate your website, such as shopping carts, Web hosting, payment gateways, virtual terminals, virtual checks, databases for fulfilling orders, customer tracking, and a way to calculate tax and shipping charges.

Accepting Payments

Typical Fees
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:

Other Payment Options

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.

Accepting Payments

Are You High Risk?
Just because some merchant account providers lump e-businesses in with other high-risk businesses, like telemarketers, merchants in the travel and cruise industries and internet auctions, it doesn't have to mean you won't be able to open a merchant account. It does mean, though, that it may be more challenging to set one up. Merchant account providers--banks and independent sales organizations--will also consider how long you've been in business, your credit history and any previous merchant accounts you've held with other processors.

Your length of time in business matters because merchant account providers want an assurance that you understand the business environment in which you operate, can identify the potential risks you face, know how to prevent or reduce fraud, and understand how to manage credit card acceptance. Regardless of risk, this kind of knowledge comes only with first-hand business experience.

Your credit report will show how well you've repaid past loans, and if you've had any liens, judgments or bankruptcies filed against you. A favorable credit history will go a long way toward establishing your credibility as a prospective merchant.

And if you've had an earlier, well-maintained merchant account, it's a positive indicator of how you're going to deal with your new processor. Terminated merchant accounts will show up on the Member Alert to Control High-Risk Merchants file, also known as the Combined Terminated Merchant File. If your previous processor terminated your merchant account because you defaulted on it, or if you incurred too many chargebacks, this may negatively impact opening a future account.

To increase your merchant account eligibility, follow these tips: