If you want to sell on the internet, your need to accept credit cards. To accept credit cards, you need a merchant account, or access to one. There’re two ways of getting this: Get your own merchant account, or ‘pimp’ off someone else’s.

The latter is the option most new merchants choose. You use a third-party to process your payments, and they take percentage. Here are a few popular ones:

PayPal.com (http://www.paypal.com)

I don’t recommend them as your main processor. See http://www.paypalsucks.com. PayPal is popular because it was ‘firstest with the mostest’ on auction sites. For this reason, eBay bought them out. PayPalSucks.com alleges that if you have a bad order they freeze your account, and can even dip into your bank account to make up any shortfalls. Mitigating circumstances are not taken into account. I’ve read enough complaints about PayPal on webmaster forums to heed them.

The usual rejoinder is; “But I’ve never had any problems with PayPal”. To which is usually retorted “Just wait ’till you get a chargeback!”

A chargeback occurs when someone asks their credit-card company for a refund. They say they didn’t get the goods, or they never made the order, or the goods were not as advertised. This is passed on to the processor, who in turn debits the merchant. Or drops him entirely. You don’t want too many of these.

I’ve used them for years for small amounts, with no problem, but on the basis of others’ complaints in webmaster forums, I wouldn’t use them for large ones. Don’t leave large amounts ‘on deposit’ in any internet-based company; they’re not banks, and even banks go bust occasionally.

The best use for PayPal is to entice customers who already use it. Find another provider to be your main one. One like …

2Checkout.com (http://www.2checkout.com)

This is a factoring service like PayPal. Unlike them, they have a pretty good reputation with webmasters. Like PayPal, they don’t provide you with a merchant account; they process your orders through their own.

This is why such sites have to be very stringent; they are answerable to their own merchant account provider. Too many bogus orders, and they go out of business.

This is why third-party factoring services like 2Checkout are very useful to a newbie merchant: fraud prevention. They can screen out suspicious orders.

Most merchants would like to think they can sell worldwide. The fact is most of the world is poor; MOST countries can’t afford your goods. So some citizens try to get them fraudulently.

A smart merchant would bar most of the world from accessing his cart, and only accept orders from the USA, Canada, western Europe, Australia and New Zealand, and his home country. Harsh, but you’ll sleep better at night.

WorldPay (http://www.worldpay.com)

A well-regarded service. I found adding it to the Oscommerce cart (http://www.oscommerce.com) a bit of a chore, but it worked. More expensive to join than 2Checkout. You don’t hear many gripes about WorldPay, which is rare in webmaster circles.

ClickBank.com (http://www.clickbank.com)

Handy if you’re selling a few items of inexpensive software to start off your business. They’ll let you up the price once they’re sure of you. I managed to get them to go up to $150 (whoo!). I was very jealous of their system. It’s well designed and extremely ‘viral’; they’re basically a huge affiliate program. Join ClickBank, and others will try and sell your product for you.

They allow you to block whole continents from trying to buy your product, and that is good. The odds are that a $25 order for an ebook, from a third-world country, is fraudulent.

If an order looks dodgy, it probably is. Contact the customer by ‘phone or email. If you don’t get a satisfactory reply, refund the card.

When you’re making $1000+ a month, get your own merchant account.

MerchantSeek (http://www.merchantseek.com)

A useful collection of affiliate links to merchant account and processing providers. Scroll down their front page to their search tool. You can find an account that suits your needs. This is most helpful to non-U.S. merchants, or those seeking ‘international merchant accounts’.

In the UK, look for ‘merchant services’ at:

Barclays bank (http://www.barclaycardmerchantservices.co.uk)

NatWest (http://www.natwest.com)

Bank Of Scotland (http://www.bankofscotland.co.uk)

Royal Bank Of Scotland (http://www.rbs.co.uk)

Streamline (http://www.streamline.com)

UK processing services are:

Secpay (http://www.secpay.com)

Netbanx (http://www.netinvest.co.uk)

Protx (http://www.protx.com)

Having one’s own merchant account means paying less in processing fees.

IMPORTANT: You should specify up-front that you are looking for an internet merchant account. Internet transactions are viewed as higher risk than those by bricks-and-mortar businesses. The technical term is ‘card not present’.

Some things you may need, if applying for an internet merchant account of your own:

Business bank account;

Photocopy of a voided cheque for said account;

Copy of the articles of incorporation of your company;

Photocopy of your return policy information;

Trade references;

Photocopy of your driver’s license or passport.

In short, you need to prove that both you and your company are what you say they are. Your account provider is taking a chance on you. You might send them a ton of bogus orders. A bank is a business too, not a community service. Help them to make the right decision! The more you can establish that you are bona-fide, the lower the cost of your account.

Things to avoid, if you can:

a) Expensive credit-card processing software rental or hire-purchase.

b) Monthly fees.

c) High discounts (the % of your sales they keep).

d) Fat fees up front (anything over $500 is a joke).

e) Salesmen calling you up with a spiel.

f) Getting lumbered with hiring their shopping cart as well.

Things to look out for at sites offering merchant accounts:

If you need to maintain a U.S. presence - full U.S. incorporation, U.S. server, U.S. offices, U.S. bank account - or NOT.

Also if they want a deposit, and the size of their application fee. And the usual monthly minimums, discounts etc.

Avoid getting into any software purchase or equipment rental. You can sort all that out later, for less money. There are plenty of good payment gateways, like Authorize.net (http://www.authorize.net) just itching for your business.

PS: Don’t accept a merchant account from an Eastern European bank. I did, some years ago. The bank went bust. One guy wailed on Usenet that he’d lost $10,000 dollars. Luckily for me, business was bad that year!

About the author: T. O’ Donnell http://www.tigertom.com is an ecommerce consultant in London, UK. His latest projects are a mortgage calculator and ebook, available at http://www.tigertom.com/mortgages-uk.shtml

Nowadays, shopping online is a very common thing. Making your purchases without leaving your house is an attractive option for many of us. Purchasing items over the internet using your credit card can be quite an unpleasant experience if you don’t make sure your payments are safe. Although many people consider that using a credit card for online transactions is not safe, they continue using this method but with increased caution measures. The greatest risk we expose ourselves to when shopping online is identity theft. But this is not the only risk, and various studies reveal that people have also other concerns like: personal information will be sold to third parties, unauthorized recurring transactions, not receiving the ordered products or even higher prices than advertised prices.

Many people think that shopping online is risky, but the risk is not greater than others. Taking few precaution measures is the best thing to do unless you want to quite shopping online. First of all, we should not shop from unknown websites. Always look for the companies you know or ask someone to recommend you a site or a company that he/she uses. Still, if you’re not sure of the vendor’s identity try to find his address and phone number and check them. Also check the refund and return policies of the company in case they don’t ship you the right products or you’re not satisfied with their quality. Another thing to be careful about is the browser that you’re using, it has to be a secured browser. A secured browser should include Secure Sockets Layer that scramble the information you are sending over the internet, making the transaction more secure. You can easily recognize a secured web site, because when you’re filling in online orders or applications a closed padlock sign should appear at the bottom of the screen. Another way to make sure that the web site is secure is to check the URL; if it begins with “https” it means the transaction is secure because the “s” stands for secure.

Another important thing to be careful about is your privacy. The information you’re submitting when you use your credit card online should be kept private by the company that receives it, meaning it should not be passed on or sold to third parties unless you agree. Most web sites ask for your permission to use personal details for direct marketing, and if you feel uncomfortable giving them permission you must know you have the right to object. Anyway, before submitting any personal details you should check the privacy policy of an website; if there are things not clear to you give them a call and see if your understanding is correct or not. Do not submit any information, unless you’re absolutely sure that your credit card details are safe.

Being able to safely use credit cards for online purchases is not only the buyer’s responsibility. The vendor has also his part of responsibility in ensuring safe purchases for his clients. Vendors also suffer from credit card frauds. They have to take some security measures in order for them and their customers to be protected against online credit card frauds. Security and privacy are two important aspects a vendor should take into consideration. He must ensure the client that the personal information submitted are kept private and at the same time he must check the details received to make sure that he’s dealing with the real cardholder.

It is a well known fact that online credit card transactions are risky, because your personal information are exposed and can be stolen by others with the intention of using them to commit frauds. Yet, if the buyers are careful to whom they relies these information and the vendors are cautious from whom they receive credit card information, the risks of online credit card frauds decreases significantly. When disclosing personal information, common sense should exist.

This article has been provided courtesy of Creditor Web. Creditor Web offers great credit card articles available for reprint and other tools to help you search and compare credit card offers.

It is often assumed if you want to accept credit
cards on your website that you must have a merchant
account. This is not the case. You can accept credit
cards with a Third Party credit card processor.

1) What is a Third Party Credit Card Processor?

A Third Party credit card processor is a company that
will accept credit card payments on behalf of you
or your company. The payments your customers make are
processed through the Third Party’s own merchant
account, and you the retailer is paid (minus a commission
fee) by the Third Party processor.

No need to pay for expensive processing software, monthly
fees or minimum transaction fees. As you only pay a
percentage fee on a sale, you cannot lose money.

2) Should I have a Merchant Account or Third Party
Processor?

For most businesses this decision will be made according
to the size of the company. Most small businesses do not
need their own merchant account.

Small businesses are better off with a Third Party
processor. The advantage is that when you sell your
products, the Third Party processor takes care of the
payment by checking the card, processing it, and sending
you a monthly check.

Larger businesses with a bigger turnover are likely to
need a full merchant account. You will pay a bigger
set-up fee for an online merchant account but pay less
per transaction than with a Third Party processor.
So recouping your initial outlay.

So there it is, unless you have a large business it is
possible to accept credit cards online with a Third
Party processor.

(c) John Lynch

For a Free report on how to get an online merchant account or a third party processor with tips for the best accounts visit: http://www.merchant-account-service.com/merchant_account.html

It is often assumed if you want to accept credit
cards on your website that you must have a merchant
account. This is not the case. You can accept credit
cards with a Third Party credit card processor.

1) What is a Third Party Credit Card Processor?

A Third Party credit card processor is a company that
will accept credit card payments on behalf of you
or your company. The payments your customers make are
processed through the Third Party’s own merchant
account, and you the retailer is paid (minus a commission
fee) by the Third Party processor.

No need to pay for expensive processing software, monthly
fees or minimum transaction fees. As you only pay a
percentage fee on a sale, you cannot lose money.

2) Should I have a Merchant Account or Third Party
Processor?

For most businesses this decision will be made according
to the size of the company. Most small businesses do not
need their own merchant account.

Small businesses are better off with a Third Party
processor. The advantage is that when you sell your
products, the Third Party processor takes care of the
payment by checking the card, processing it, and sending
you a monthly check.

Larger businesses with a bigger turnover are likely to
need a full merchant account. You will pay a bigger
set-up fee for an online merchant account but pay less
per transaction than with a Third Party processor.
So recouping your initial outlay.

So there it is, unless you have a large business it is
possible to accept credit cards online with a Third
Party processor.

(c) John Lynch

For a Free report on how to get an online merchant account or a third party processor with tips for the best accounts visit: http://www.merchant-account-service.com/merchant_account.html

To conduct business on the Internet, whether informal, one-time only transactions between two friends, or a full-fledged business selling products or services, payment arrangements have to be made. Before 1998, this often meant either checks sent through snail-mail, or very expensive, and often hard-to-obtain, merchant accounts for online credit card processing. In 1998, PayPal was introduced to fill the payment processing gap.

PayPal now has about 50 million members, but was originally introduced to provide a payment processing service for online auction buyers and sellers, in particular, eBay. Since then, PayPal has grown into the premier third-party payment processing service. In fact, PayPal was so successful that eBay bought the company in 2002, replacing their own Billpoint service with the far superior PayPal service.

PayPal is free to join, although buyers are no longer required to join in order to pay for goods and services from seller members. Many people are still afraid to do business online, and won’t provide their credit card information. Scams certainly abound in cyberspace, but PayPal is a solid, reputable company, and there is little to fear.

For sellers, PayPal offers much lower processing fees than many other third-party processors. PayPal rates are not much higher than those of merchant account processors, and there are no ongoing fees. You only pay PayPal fees when you make a sale. It is also much easier and faster to set up a PayPal account than a merchant account. Some sellers complain of unjustly frozen PayPal accounts, and as with most any service, there are plenty of horror stories surrounding other PayPal actions. However, many more buyers and sellers have used PayPal from the beginning with no problem at all.

PayPal offers transfer of funds to and from a PayPal account through e-checks, debit and credit cards, and instant transfer from other members’ accounts. They offer debit cards to allow you to make purchases against your account balance, just as you would with a bank debit card, a money-market interest rate on the balances in some accounts, seller and buyer protection services, invoicing, recurring billing, shopping cart, and many other tools that online merchants may need.

To conduct business on the Internet, whether informal, one-time only transactions between two friends, or a full-fledged business selling products or services, payment arrangements have to be made. Before 1998, this often meant either checks sent through snail-mail, or very expensive, and often hard-to-obtain, merchant accounts for online credit card processing. In 1998, PayPal was introduced to fill the payment processing gap.

PayPal now has about 50 million members, but was originally introduced to provide a payment processing service for online auction buyers and sellers, in particular, eBay. Since then, PayPal has grown into the premier third-party payment processing service. In fact, PayPal was so successful that eBay bought the company in 2002, replacing their own Billpoint service with the far superior PayPal service.

PayPal is free to join, although buyers are no longer required to join in order to pay for goods and services from seller members. Many people are still afraid to do business online, and won’t provide their credit card information. Scams certainly abound in cyberspace, but PayPal is a solid, reputable company, and there is little to fear.

For sellers, PayPal offers much lower processing fees than many other third-party processors. PayPal rates are not much higher than those of merchant account processors, and there are no ongoing fees. You only pay PayPal fees when you make a sale. It is also much easier and faster to set up a PayPal account than a merchant account. Some sellers complain of unjustly frozen PayPal accounts, and as with most any service, there are plenty of horror stories surrounding other PayPal actions. However, many more buyers and sellers have used PayPal from the beginning with no problem at all.

PayPal offers transfer of funds to and from a PayPal account through e-checks, debit and credit cards, and instant transfer from other members’ accounts. They offer debit cards to allow you to make purchases against your account balance, just as you would with a bank debit card, a money-market interest rate on the balances in some accounts, seller and buyer protection services, invoicing, recurring billing, shopping cart, and many other tools that online merchants may need.

What a great idea! Start accepting credit cards and watch your profits soar. Nothing could be simpler. Or so you thought until you began researching merchant accounts. It can all get extremely confusing. There is an easy way to find the best deal that suits your business. You’ll be able to compare apples to apples and have a clear picture of what the merchant account will cost you.

Let’s take a look at some of the phrases you’ll encounter (in layman’s terms) when you begin to search for a merchant account.

— Merchant Account Provider - The company who arranges for your payment hardware or software and your ability to accept credit cards.

— Nova - The company who processes the credit card transactions and forwards them to the appropriate credit card company for payment (Visa, MasterCard, American Express, etc.)

— Set Up Fee - The one-time amount the merchant account provider charges to set up your company in their system. For this example, we’ll use a set up fee of $65.00.

— Discount Fee -One amount (there are others) that Nova and the merchant account provider deduct from each sale as a portion of their payment for your merchant account. We’ll use a discount fee of 2.25%.

— Per Transaction Fee - This is a second amount that the two companies subtract from each transaction as a portion of their payment. For our example, we’ll pick a per transaction fee of $.35.

— Terminal or Gateway Fee - Whether you have a real terminal or a virtual gateway via the Internet, you will be assessed monthly charges to cover the use of that service. Let’s say $10.00 for our example.

— Statement Fee - The fee for your merchant account provider to send an itemized statement each month. An average amount we can use is $15.00.

— Annual Fee - An annual fee just for having your merchant account. For the annual fee example, we’ll choose $35.00.

I know what you’re thinking! But don’t give up before you start. Remember, I’m going to show you a way to decipher all this information.

Choose a number — any number. This will be the total number of transactions you think you might conduct during the course of a year. For our example, we’ll use 100. Next, choose an average transaction amount for your product or services. We’ll say $175.00 for now. Finally, we’ll calculate a year’s worth of charges by using the amounts above and within the definitions.

Set Rate Charges:

Set up Fee = $65.00 (one time only)

Gateway Fee = $10.00/mth

Statement Fee = $15.00/mth

Annual Fee = $25.00/yr

Then multiply your estimated number of transactions by the $ .35 per transaction fee. That equals $35.00. Next, multiply the average transaction amount ($175) by the discount rate of 2.25%. That equals $3.94. You’ve estimated that you’ll have 100 transactions per year, so again, multiply the $3.94 by the 100 transactions. The total equals $394.00. All that is left is to add them all up.

Set up Fee = $65.00 (one time only)

Gateway Fee = $10.00 x 12 months = $120.00/yr

Statement Fee = $15.00 x 12 months = $180.00/yr

Annual Fee = $25.00/yr

Per Transaction Fees = $35.00/yr

Discount Rate Fees = $394.00/yr

Total Fees & Charges For One Year = $819.00

Let’s look at one other quick example just to show you that looks can be deceiving.

This company offers the following rates:

Set up Fee = FREE

Gateway Fee = $15.00/mth

Statement Fee = $10.00/mth

Annual Fee = FREE

Per Transaction Fees $ .30

Discount Rate Fees = 2.35%

Software Lease = $24.95/mth

Based on our same $175 average transaction and 100 transactions per year, we come out with the following figures:

Set up Fee = FREE

Gateway Fee = $15.00 x 12 = $180.00

Statement Fee = $10.00 x 12 = $120.00

Annual Fee = FREE

Per Transaction Fees (100 transactions x $ .30 = $30.00)

Discount Rate Fees = $175 avg. transaction x 2.35% = $4.11 x 100

transactions = $411.00)

Software Lease = $24.95 x 12 = $299.40

(an additional fee our first provider didn’t charge)

Total Fees & Charges For One Year = $1040.40.

Even with free set up and no annual fee, this company still charges over $200 per year more than the first merchant account provider we previewed. Be very careful - the word “free” can often times be deceiving.

Merchant accounts can open a world of new business for your company. They can provide a very convenient way for your clients to pay - and for YOU to get your money. However, when you shop for a merchant account, be sure to use a standard unit of measure like we’ve outlined above to be very sure that you are getting the deal best suited for your company.

We all know that accepting credit cards is the key to online sales. Unfortunately, most merchants are unaware that acquiring a merchant account can actually save them money. And in many cases, big money!

For this experiment, we will use a fictional character named Bill. Bill owns and operates a great online resources for marketing tools and resources. Bills website is a membership based website, and therefore could potentially be approved for both third party processing and an internet merchant account. Bill starts off processing his business with a popular third party processor who offers him the following plan:

Start Up Fee - None

Monthly Fee - None

Transaction Fees - 13.5% (Initial or One Time), 15.0% (Recurring)

Bills sets up his business with this popular third party processor and charges $30 per month. He has built an extensive reciprocal link exchange directory, has purchased some PPC advertising on a few of the best search engines, and has reached a excellent spot in the content based search listings for the top 5 search engines. His customer base has grown from zero before accepting credit cards, to 150 members, is just one month. Bill can’t believe his success at internet marketing, and is planning on building even more web based resources and tools for his website, thus increasing the value and content. He is ecstatic at the initial results, so let’s take a look at Bills numbers:

$30 (Per Membership Sold) x 150 (Memberships Sold) = $4,500.00

$4,500 x 13.5% (Initial or One Time Transactions) - $ 607.50

$4,500.00 (In total sales)

- 607.50 (Total fees)

= $3,892.50 (Net profit after all processing fees have been deducted)

Ok. Well Bill certainly had an excellent first month accepting credit cards with his new business venture. But let’s see how Bill would have made out if he would have secured an internet merchant account for his new business:

Start Up Fee None

Monthly Fee $15.00

Discount Rate 2.35% (Initial, One Time or Recurring)

Per Trans Fee .30 cents

Gateway Mo. Fee $15.00

AVS Fees .10 cents

Now the first thing we see is that the merchant account company is showing us more fees. This may be disheartening at first sight, but we should really explore what these fees are, and how they affect our bottom line.

Start Up Fee: This remains the same. Bill paid zero to get setup with his new merchant account, just as he paid zero to get setup with the third party processing account.

Monthly Fee: The third party processor offered us no monthly fees, yet we must pay $15.00 with the merchant account company.

Discount Rate: The merchant account has labeled one of their fees as “discount rate.” These fees are the fees Bill will pay as a percentage of each transaction. They are similar to the main fee charged by the third party processor. This fee when charged by the merchant account company is substantially smaller than the high percentage charged by the third party processor. But we will wait till the end of this experiment to see who offers the better comprehensive deal.

Per Trans Fee: The merchant account company charges Bill .30 per transaction he processes through his merchant account. Of course, we have already established that Bill will pay no per transaction fees with the package he received from the third party processor.

Gateway Monthly Fee: Because Bill will also need an internet payment gateway for his merchant account to work online with his website, he will also be paying $15.00 a month for his Gateway Monthly Fee.

AVS Fees: The AVS fee stands for Address Verification Service. Bill will want to use this service, to help reduce potential fraud, and customer chargebacks to his merchant account. He will now pay an additional per transaction fee of .10 per transaction.

Let’s see the numbers behind processing with a merchant account as opposed to a third party processor:

$30 (Per Membership Sold) x 150 (Memberships Sold) = $4,500.00

$15.00 (Merchant Account Monthly Fee) - $15.00

$15.00 Gateway Monthly Fee) - $15.00

2.35% (Discount Rate) x $4,500.00 - $105.75

30 cents (Per Trans Fee) x 150 (Memberships Sold) - $45.00

10 cents (AVS Fees) x 150 (Memberships Sold) - $15.00

Total Fees (With Merchant Account) = $195.75

$4,500.00 (In total sales)

- 195.75 (Total fees)

= $4,304.25 (Net profit after all processing fees have been deducted)

With the merchant account, Bill was able to keep substantially more of his sales for himself, as profit. Bill could use these extra resources to advertise more, expand his operation, and even hire someone to work for him, even if only on a part time basis. The point is that that the better deal in credit card processing is always with a merchant account as opposed to using a third party processor.

Most third party processors leverage the high levels of risk and chargebacks they must face everyday, by charging enormous fees and rates to their entire customer base. Third party processors are synonymous with Adult related websites. This is the reason for their increased exposure to risk. They must charge high rates to overcome the losses they are subject to by processing for a category of merchants that, unfortunate as it may be for them, falls into a certain level of risk and fraud that most other merchants do not. Because the merchant account company restricts its clientele to only companies with non adult related content, they are able to offer an entrepreneur like Bill, selling online content through his membership based marketing website, a much better deal in credit card processing.

$4,304.25 (Net Profit with Merchant Account)

- 3,892.50 (Net Profit with Third Party Processing)

= $411.75 (Total Savings with Merchant Account)

This experiment has shown that the average website owner can save substantially by choosing wisely when it comes to their credit card processing solution. We have proved that most any entrepreneur can and will save substantial amounts of money by using a merchant account for their online credit card processing, as opposed to processing with a third party processor. In our little test, Bill saved $411.75, and that was just in the first month alone.

Remember, that the third party processor will charge more, 15.0% to be exact, per transaction, once the customer is charged on a recurring basis. This means that for the second month, Bill would have paid even more to his third party processor; $675.00 to be exact! And that is just on the first months returning 150 customers. Every time Bill has a recurring payment processed through his third party processing account, he would be subject to a 15.0% transaction fee on all those sales. Not a very thrifty choice for credit card processing.

As with any business decision, be smart. Compare rates and plans, and make sure the “simple” setup is really worth the cost. In most cases, your Merchant Service Provider can setup your merchant account in as little as 24 hours. This is faster than your third party processor, and adds even more value to the otherwise already vastly superior deal you are receiving with your very own merchant account.

What a great idea! Start accepting credit cards and watch your profits soar. Nothing could be simpler. Or so you thought until you began researching merchant accounts. It can all get extremely confusing. There is an easy way to find the best deal that suits your business. You’ll be able to compare apples to apples and have a clear picture of what the merchant account will cost you.

Let’s take a look at some of the phrases you’ll encounter (in layman’s terms) when you begin to search for a merchant account.

— Merchant Account Provider - The company who arranges for your payment hardware or software and your ability to accept credit cards.

— Nova - The company who processes the credit card transactions and forwards them to the appropriate credit card company for payment (Visa, MasterCard, American Express, etc.)

— Set Up Fee - The one-time amount the merchant account provider charges to set up your company in their system. For this example, we’ll use a set up fee of $65.00.

— Discount Fee -One amount (there are others) that Nova and the merchant account provider deduct from each sale as a portion of their payment for your merchant account. We’ll use a discount fee of 2.25%.

— Per Transaction Fee - This is a second amount that the two companies subtract from each transaction as a portion of their payment. For our example, we’ll pick a per transaction fee of $.35.

— Terminal or Gateway Fee - Whether you have a real terminal or a virtual gateway via the Internet, you will be assessed monthly charges to cover the use of that service. Let’s say $10.00 for our example.

— Statement Fee - The fee for your merchant account provider to send an itemized statement each month. An average amount we can use is $15.00.

— Annual Fee - An annual fee just for having your merchant account. For the annual fee example, we’ll choose $35.00.

I know what you’re thinking! But don’t give up before you start. Remember, I’m going to show you a way to decipher all this information.

Choose a number — any number. This will be the total number of transactions you think you might conduct during the course of a year. For our example, we’ll use 100. Next, choose an average transaction amount for your product or services. We’ll say $175.00 for now. Finally, we’ll calculate a year’s worth of charges by using the amounts above and within the definitions.

Set Rate Charges:

Set up Fee = $65.00 (one time only)

Gateway Fee = $10.00/mth

Statement Fee = $15.00/mth

Annual Fee = $25.00/yr

Then multiply your estimated number of transactions by the $ .35 per transaction fee. That equals $35.00. Next, multiply the average transaction amount ($175) by the discount rate of 2.25%. That equals $3.94. You’ve estimated that you’ll have 100 transactions per year, so again, multiply the $3.94 by the 100 transactions. The total equals $394.00. All that is left is to add them all up.

Set up Fee = $65.00 (one time only)

Gateway Fee = $10.00 x 12 months = $120.00/yr

Statement Fee = $15.00 x 12 months = $180.00/yr

Annual Fee = $25.00/yr

Per Transaction Fees = $35.00/yr

Discount Rate Fees = $394.00/yr

Total Fees & Charges For One Year = $819.00

Let’s look at one other quick example just to show you that looks can be deceiving.

This company offers the following rates:

Set up Fee = FREE

Gateway Fee = $15.00/mth

Statement Fee = $10.00/mth

Annual Fee = FREE

Per Transaction Fees $ .30

Discount Rate Fees = 2.35%

Software Lease = $24.95/mth

Based on our same $175 average transaction and 100 transactions per year, we come out with the following figures:

Set up Fee = FREE

Gateway Fee = $15.00 x 12 = $180.00

Statement Fee = $10.00 x 12 = $120.00

Annual Fee = FREE

Per Transaction Fees (100 transactions x $ .30 = $30.00)

Discount Rate Fees = $175 avg. transaction x 2.35% = $4.11 x 100

transactions = $411.00)

Software Lease = $24.95 x 12 = $299.40

(an additional fee our first provider didn’t charge)

Total Fees & Charges For One Year = $1040.40.

Even with free set up and no annual fee, this company still charges over $200 per year more than the first merchant account provider we previewed. Be very careful - the word “free” can often times be deceiving.

Merchant accounts can open a world of new business for your company. They can provide a very convenient way for your clients to pay - and for YOU to get your money. However, when you shop for a merchant account, be sure to use a standard unit of measure like we’ve outlined above to be very sure that you are getting the deal best suited for your company.

We all know that accepting credit cards is the key to online sales. Unfortunately, most merchants are unaware that acquiring a merchant account can actually save them money. And in many cases, big money!

For this experiment, we will use a fictional character named Bill. Bill owns and operates a great online resources for marketing tools and resources. Bills website is a membership based website, and therefore could potentially be approved for both third party processing and an internet merchant account. Bill starts off processing his business with a popular third party processor who offers him the following plan:

Start Up Fee - None

Monthly Fee - None

Transaction Fees - 13.5% (Initial or One Time), 15.0% (Recurring)

Bills sets up his business with this popular third party processor and charges $30 per month. He has built an extensive reciprocal link exchange directory, has purchased some PPC advertising on a few of the best search engines, and has reached a excellent spot in the content based search listings for the top 5 search engines. His customer base has grown from zero before accepting credit cards, to 150 members, is just one month. Bill can’t believe his success at internet marketing, and is planning on building even more web based resources and tools for his website, thus increasing the value and content. He is ecstatic at the initial results, so let’s take a look at Bills numbers:

$30 (Per Membership Sold) x 150 (Memberships Sold) = $4,500.00

$4,500 x 13.5% (Initial or One Time Transactions) - $ 607.50

$4,500.00 (In total sales)

- 607.50 (Total fees)

= $3,892.50 (Net profit after all processing fees have been deducted)

Ok. Well Bill certainly had an excellent first month accepting credit cards with his new business venture. But let’s see how Bill would have made out if he would have secured an internet merchant account for his new business:

Start Up Fee None

Monthly Fee $15.00

Discount Rate 2.35% (Initial, One Time or Recurring)

Per Trans Fee .30 cents

Gateway Mo. Fee $15.00

AVS Fees .10 cents

Now the first thing we see is that the merchant account company is showing us more fees. This may be disheartening at first sight, but we should really explore what these fees are, and how they affect our bottom line.

Start Up Fee: This remains the same. Bill paid zero to get setup with his new merchant account, just as he paid zero to get setup with the third party processing account.

Monthly Fee: The third party processor offered us no monthly fees, yet we must pay $15.00 with the merchant account company.

Discount Rate: The merchant account has labeled one of their fees as “discount rate.” These fees are the fees Bill will pay as a percentage of each transaction. They are similar to the main fee charged by the third party processor. This fee when charged by the merchant account company is substantially smaller than the high percentage charged by the third party processor. But we will wait till the end of this experiment to see who offers the better comprehensive deal.

Per Trans Fee: The merchant account company charges Bill .30 per transaction he processes through his merchant account. Of course, we have already established that Bill will pay no per transaction fees with the package he received from the third party processor.

Gateway Monthly Fee: Because Bill will also need an internet payment gateway for his merchant account to work online with his website, he will also be paying $15.00 a month for his Gateway Monthly Fee.

AVS Fees: The AVS fee stands for Address Verification Service. Bill will want to use this service, to help reduce potential fraud, and customer chargebacks to his merchant account. He will now pay an additional per transaction fee of .10 per transaction.

Let’s see the numbers behind processing with a merchant account as opposed to a third party processor:

$30 (Per Membership Sold) x 150 (Memberships Sold) = $4,500.00

$15.00 (Merchant Account Monthly Fee) - $15.00

$15.00 Gateway Monthly Fee) - $15.00

2.35% (Discount Rate) x $4,500.00 - $105.75

30 cents (Per Trans Fee) x 150 (Memberships Sold) - $45.00

10 cents (AVS Fees) x 150 (Memberships Sold) - $15.00

Total Fees (With Merchant Account) = $195.75

$4,500.00 (In total sales)

- 195.75 (Total fees)

= $4,304.25 (Net profit after all processing fees have been deducted)

With the merchant account, Bill was able to keep substantially more of his sales for himself, as profit. Bill could use these extra resources to advertise more, expand his operation, and even hire someone to work for him, even if only on a part time basis. The point is that that the better deal in credit card processing is always with a merchant account as opposed to using a third party processor.

Most third party processors leverage the high levels of risk and chargebacks they must face everyday, by charging enormous fees and rates to their entire customer base. Third party processors are synonymous with Adult related websites. This is the reason for their increased exposure to risk. They must charge high rates to overcome the losses they are subject to by processing for a category of merchants that, unfortunate as it may be for them, falls into a certain level of risk and fraud that most other merchants do not. Because the merchant account company restricts its clientele to only companies with non adult related content, they are able to offer an entrepreneur like Bill, selling online content through his membership based marketing website, a much better deal in credit card processing.

$4,304.25 (Net Profit with Merchant Account)

- 3,892.50 (Net Profit with Third Party Processing)

= $411.75 (Total Savings with Merchant Account)

This experiment has shown that the average website owner can save substantially by choosing wisely when it comes to their credit card processing solution. We have proved that most any entrepreneur can and will save substantial amounts of money by using a merchant account for their online credit card processing, as opposed to processing with a third party processor. In our little test, Bill saved $411.75, and that was just in the first month alone.

Remember, that the third party processor will charge more, 15.0% to be exact, per transaction, once the customer is charged on a recurring basis. This means that for the second month, Bill would have paid even more to his third party processor; $675.00 to be exact! And that is just on the first months returning 150 customers. Every time Bill has a recurring payment processed through his third party processing account, he would be subject to a 15.0% transaction fee on all those sales. Not a very thrifty choice for credit card processing.

As with any business decision, be smart. Compare rates and plans, and make sure the “simple” setup is really worth the cost. In most cases, your Merchant Service Provider can setup your merchant account in as little as 24 hours. This is faster than your third party processor, and adds even more value to the otherwise already vastly superior deal you are receiving with your very own merchant account.