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| Accepting
Credit Cards online: an Introduction |
If you're
not already accepting Credit Cards online for your e-business,
then you're leaving money on the table. If you're planning
to start up an e-commerce, then you should start planning
to accept Credit Cards online now. Without a Merchant
Account you'll be confined essentially to accepting
payments by check. While many consumers and small businesses
remain understandably wary of giving personal details
online, in particular Credit or Debit Card details,
accepting Credit Cards online is the fastest growing
method of processing payments on the Internet.
There are three basic ways that can enable you to start
accepting Credit Cards on the Internet:
- Obtain a merchant account from
your bank
- Use a Merchant Account Provider
to obtain your merchant account
- Get a Third Party Merchant Account
|
| Obtain
a merchant account from your bank |
| Whilst
this may seem at first to be the most straightforward
solution to the problem, in many (if not most) cases
it is definitely not the best way to obtain a Merchant
Account to start accepting Credit Cards over the Internet.
While most banks will provide you with a business account
and other tools you will need to accept payments for
your business, they are also very reluctant to provide
start ups with a Merchant Account to start accepting
Credit Cards online. Often one year (and sometimes up
to five years) of certified trading accounts will need
to be shown, sometimes along with Business Plans or
Venture Capital.
In fact, Merchant Accounts for accepting Credit Cards
in-store (by High street retailers) are much easier
to obtain than Merchant Accounts for accepting Credit
Cards online. Because the Internet is a Remote environment
where online customers cannot visit your "shop" or talk
to you, the fact that the Credit Card cannot be swiped
and checked against a signature makes accepting Credit
Cards online a far greater risk... And risk limitation
is what banks are all about!
Transactions that are conducted over the Internet are
considered to be riskier than regular transactions and
here are the key factors that the merchant account bank
considers when determining risk: |
- The type of product you're selling
- How long you've been in business
(the longer you've been in business, the better)
- Cost of your product
- Monthly sales volume
- Your personal credit history
While many banks are starting to
realise the potential of e-trade and are priming themselves
to cash in on the e-revolution by providing more e-commerce
related services, as a relative newcomer or total beginner
you will not stand much of a chance of obtaining a Merchant
Account provided directly from your bank. To start accepting
Credit Cards online quickly, your best bet is probably
to embrace a Merchant Account provider. |
No
application fees, Total package Merchant
Account (US
only) |
 |
| Use a
Merchant Account Provider to obtain your merchant account |
| A Merchant Account
Provider (also known as a Payment Solution Provider)
will broker between the applicant (you) and the bank.
The key to getting your application accepted is to minimize
risk. Set your new venture's objectives realistically,
even lower than your actual expectations to make your
application sound like a very low risk from the standpoint
of the bank. Make your aims feel achievable and realistic
and your chances of approval will be greatly increased.
Please note that obtaining a Merchant Account can be
an expensive process. Many companied will charge a non
refundable fee simply for processing your application,
with no guarantee of success at all! Avoid Merchant
Account providers that apply an application fee, you
shouldn't have to pay to apply for something that will
make the Merchant Account provider money as well. |
Many
applicants are also refused on the grounds that they
are not an existing company. You want to obtain a Merchant
Account to start accepting Credit Cards over the Internet
but you do not want to be a Company? Sounds suspicious
or at least... very lazy!
Becoming a Limited shareholder Company
is incredibly easy and can be done over the Internet.
Not long ago, we (GMNetPromos.com LTD, owners of A1-merchant-account.com)
went through this process of incorporation over the
Internet. Filling in the form took about 10 minutes
and cost slightly under £40 (inc. VAT). Three days later
we had the Certificate of Incorporation on our office
wall!
Some Merchant Account Providers
may also ask you about your personal wealth, outstanding
loans and Credit Cards. Show as little outstanding debits
as possible to maximize your chances and start accepting
Credit Cards online soon.
In brief, think of your self as
applying for an insurance: the safer and "duller" everything
looks, the higher your chances of being accepted are.
Also, "safety" and "risk" factors may considerable affect
the rates that can be negotiated: "safer" applicants
will usually pay less.
However, if you find that your application
has not been accepted, then do not despair but use the
third way: a Third Party Merchant Account |
No
application fees, Total package Merchant
Account (US
only) |
|
| Third
party merchant account |
Does
using a Third party Merchant Account smack a little
of desperation? It should not. The leading Third Party
Merchant Accounts are in fact used very often by e-businesses
that have their own Merchant Account for accepting Credit
Cards online. They use the Third Party Merchant Account
as an alternative means of payment. Offering a wide
variety of payment methods online is key to increasing
your conversion rates and closing as many sales a possible.
Like Merchant Accounts, all Third party Merchant Account
differ. However, accepting Credit Cards online with
a Third party Merchant Account will usually involve
three easy steps:
- E-mail address verification
- Filling in an online form
- Credit card verification: some
Third Party Merchant Accounts will credit your sales
to your Credit Card, in which case you obviously need
a valid Credit Card
Upon completion of the application...
you're in Business and ready to start accepting Credit
Cards! There are usually no set up fees or monthly fees
but the transaction fees will usually be substantially
higher compared to what you would pay with your own
Merchant Account. |
For
an Internet start up the higher transaction fees may
well be offset by the set up and monthly fees you would
incurr from your own Merchant Account, if we assume
(realistically) that your Internet turnover is unlikely
to be massive during the first months of trading. So
the higher transaction costs associated with a Third
party Merchant Account need not be a problem during
the start up phase of your e-business
Third Party Merchant Accounts have three other drawbacks
compared to Merchant Accounts:
- You will be paid considerably later. Third Party
processors typically will pay between 14 to 45 days
from the day of purchase. Not a big problem but it
does slow your cash flow down consirably.
- In most cases the Customer Interface (the payment
page) is not personalizable and your Customer will
know you are using a Third Party Merchant account,
instead of your own. Again, processors vary: PayPal
eg. does allow you to put your Company logo on the
payment page.
- In most cases your Customers will receive their
e-mail receipts for their purchases with the Third
party processor's name on it but without mention of
your organization's name. This looks less professional.
In spite of these apparent drawbacks, a Third Party
Merchant Account is something you should consider even
if you have your own Merchant Account because offering
different methods of payments will greatly increase
the number of closed sales. For that same reason, more
traditional methods of payments like checks or e-checks
should be an integral part of your payment processing
policy.
Below are two of the most widely used Third Party Merchant
Accounts used on the Internet: PayPal and ClickBank. |
No
application fees, Total package Merchant
Account (US
only) |
|
| PayPal |
PayPal
is one of the most used Payment Solution Providers on
the internet, Third Party or not. The ease and speed
with which an account can be set up and used, with no
set up fees or monthly fees has made this Merchant
Account popular with start ups, seasoned e-marketers
and their customers alike. Signing up will involve the
three steps outlined above. After signing up you can
start using your account with the familiar "Buy me"
buttons which take minutes to set up and incorporate
in the code of your Website. PayPal offers extensive
support to Website developers wishing to make the most
of their PayPal account. This support has undoubtably
contributed strongly to PayPal's popularity amongst
the e-commerce community.
From the Customer's viewpoint, making a payment proceeds
as follows:
- A customer who has never used
PayPal to make a payment (either on your Website or
anybody else's) will make the payment in much the
same way as he would using any Merchant Account payment:
all details of the card (PayPal supports VISA, Mastercard,
Discover and Amex) as well as personal details are
required. This is the usual, tedious "fill in the
form" bit. When payment has been accepted the Customer
becomes a verified PayPal buyer and is issued a password.
- Next time the newly verified
PayPal buyer wants to make a payment using PayPal
(either on your Website or anybody else's) he will
only require his verified e-mail address and PayPal
password. No more endless filling in forms! If the
Customer has cookies enabled, PayPal will actually
recognize the verified buyer and only the password
will be required to make the payment. This technology
has also played a great part in getting PayPal widely
accepted by e-businesses and their customers.
So, if you have a valid e-mail address
and a valid Credit Card, you're minutes away from accepting
Credit Cards online! To learn full details about PayPal,
click the banner below. |
 |
| ClickBank |
| ClickBank is a stand
alone in the world of Third Party Merchant Accounts in
the sense that it provides Marketers with a very large
number of products to sell, without any set up fees or
monthly fees but it also provides Marketers who which
to sell their own product(s) with a very low cost Payment
method as well as an extensive Affiliate network which
will provide you with extra sales at virtually no extra
cost. |
 |
| So,
there are two ways to use ClickBank (but you can use
both ways at the same time).
Firstly, becoming a reseller for as many products
as you like of the over 10,000 products to choose from
on ClickBank's marketplace. Joining ClickBank as a reseller
is totally free and only requires you to fill in an
on line form with your correct e-mail address, mailing
address (ClickBank pays your commissions by check) and
the username (also known as your ClickBank nickname)
of your choice. Next ClickBank will confirm your signing
up by e-mail and issue you with a password to log in
to the members area where you can choose the products
you want to market, see how much commission each product
will earn you and check your sales stats at any time.
You are now ready to start accepting Credit Cards online.
Next you start promoting products by means of your
so called ClickBank Affiliate hoplinks. An example of
such a link is http://hop.clickbank.net/?gmeyers.supertips,
which leads to the aptly chosen example of a product
on the right (a FREE book on using ClickBank,
so don't be shy!). In the hoplink, "gmeyers" is our
ClickBank nickname and "supertips" is the Vendor's ClickBank
nickname. Using the universal format of affiliate links
allows you to start marketing other people's products
within minutes of joining in any way you see fit. (ClickBank
does warn against direct use of hoplinks in e-mail marketing
because any spam complaints leading to you will result
in your account being terminated, forfeiting any outstanding
commissions).
Secondly, becoming a ClickBank Vendor is equally
easy and practically free of charge. If you have a product
or service to offer but do not yet qualify for a Merchant
Account then ClickBank is an easy and very inexpensive
way to start selling your product. ClickBank only charges
an activation fee ($47) to set your product up. It becomes
part of the ClickBank Marketplace where ClickBank resellers
can obtain details on the product, such as the commission
(the Vendor sets the percentage earned by the reseller)
and your Vendor ClickBank nickname. The affiliate program
that comes with joining ClickBank as a Vendor, with
no affiliate program software required, is one of the
most attractive features of the ClickBank Third Party
Merchant Account program. Both Vendor and their Reseller
will be accepting Credit Cards online.
To join ClickBank as a Reseller or as a Vendor (or
both), click the button below: |
| Internet
shopping cart |
| The term Internet Shopping
Cart stems of course from the practice of modelling Inernet
stores on High street retail points, including shop ailes,
shelves, shopping basket or carts and last but not least...
the checkout counter where you will be accepting Credi
Cards!
Whilst e-commerce is quickly becoming
a multi-trillion dollar worldwide business and a method
of retail that is literally taking the world by storm,
when all the hype has blown away it is important to
realize that compared to traditional retail, e-commerce
is still relatively small. There are of course many
reasons for this, most of which will be only a fading
memory in relatively few years to come.
Fears of fraud means that a sizeable
part of the population is still reluctant to provide
Credit Card details over a phone line to a complete
stranger. Increased vigilance on behalf of all involved
in the various stages of e-commerce will increase Customer
confidence over time.
But apart from concerns about fraud
there is another important factor which is still keeping
a lot of potential Customers away from the Internet.
Whilst shopping on the Internet can be done from the
confort of your home, it is also essentially a lonely
and remote experience. Most people like to browse the
goods they see in High street shops and markets, perhaps
trying them on, flipping through the pages of a book
or chatting to the store assistant. Virtual dressing
rooms remains of course a thing of the future for some
time to come. |
| Shopping
cart software aims to make the Internet shopping experience
as close a match to retail shopping as is possible. The
Internet store fitted with shopping cart software presents
itself in much the same way as any department store. The
Customer will wonder along ailes, give some articles a
closer look before adding them to the shopping cart or
basket, to end up at the check out counter where the secure
Payment Gateway will be accepting Credit Cards. |
No
application fees, Total package Merchant
Account (US
only) |
|
Whilst
Internet stores fitted with shopping cart software are
perhaps the most suitable for selling tangible goods
like books, CDs, clothes etc. there is no reason not
to apply the same method to digital products such as
software or other downloadable products. Applying an
e-cover (virtual packaging) to the product will create
the illusion of a tangible product which can then be
put on display much like any other tangible product.
Shopping cart software can also be of assistance in
keeping inventory (stock taking).
Most Merchant Account providers will include a shopping
cart solution in their package. Alternatively, if you're
an advanced Webdeveloper you may prefer to create your
own shopping cart software or buy stand alone shopping
cart software to be hosted on your server. |
| Payment
gateway |
The
term Payment Gateway simply refers to accepting Credit
Cards online, using a secure line (Secure Socket Layer
or SSL which is the technology required to keep information
confidential and is contained in a program layer between
your Web browser and the Internet's TCP/IP layers).
In practical terms opting for the secure Payment Gateway
means that you expect your Merchant account provider
to provide just that and nothing more. All e-commerce
programming, like shopping cart development, "Buy me"
buttons etc. will have to be supplied by you or another
third party. Obviously, choosing to obtain the use of
a Payment Gateway will be less expensive (but you will
have to factor in the development of the other aspects
of your e-commerce). Many Merchant Account providers
will offer the Payment Gateway on its own and the Merchant
Account advertized on this page also offers this option. |
| Glossary
of Merchant Account terms |
This
glossary will help you understand what exactly you're
getting yourself into when applying for a Merchant Account:
Merchant Account
A Merchant Account is simply a relationship between
a retailer and a merchant bank that enables retailers
to accept web-based credit card payments from their
customers. This is the account into which a Merchant
Account Provider deposits payments into your business
checking account from the transactions made online.
To qualify for a merchant account, retailers must meet
the bank's requirements.
Application fee
A fee charged by some Merchant Account providers to
process and consider your application. Paying an application
fee makes the applicant in no way more eligible to be
accepted for a Merchant Account. Avoid Merchant Account
providers that charge you for your application.
Internet discount rate
An Internet discount rate is a fixed percentage taken
from every online transaction, usually two to three
percent. The Internet rate will generally be higher
than card-swipe rates, the rate charged when the merchant
can swipe the customer's card through a traditional
point-of-sale (POS) terminal. The internet discount
rate runs at a higher rate because it's not face-to-face
and is a riskier proposition for the bank who provides
the merchant account. |
Transaction
fee
Merchant Account Providers typically have fixed charges,
usually between $0.25 and $0.70 per transaction. It
works like this. On a $100 sale, if the discount rate
was 2.39%, $2.39 would be deducted from a $100 sale.
There is a transaction fee charged to each order and
we'll use 30 cents is this example. Therefore, on the
$100 sale, the processor would keep $2.69 , giving you,
the merchant a net of $97.31. Note, some banks deduct
this fee at time of sale, while most deduct it as a
total of charges at the end of each month. Visa & MasterCard
and the processor take a fee for every transaction.
Monthly fees and minimums
There is a variety of charges levied on a monthly basis
by the bank, including a monthly statement fee and/or
a monthly minimum, excess usage fees, and others. |
No
application fees, Total package Merchant
Account (US
only) |
|
Chargebacks
Your Merchant Account Provider may holdback, or reserve,
a percentage of your transaction receipts to cover any
contested charges. A Chargeback is charged to a merchant
when a consumer claims their card has been charged and
the merchant has not delivered the product or performed
the service. A chargeback fee is NOT charged when a
merchant processes a return of a charge to a consumer.
Reserve
If your business is considered high-risk, you may have
to pay what's called a reserve. The reserve is usually
calculated as a percentage of the monthly credit card
volume. It is built up over time and held by the bank
in escrow to offset unexpected chargebacks.
In addition, let's also take a look at the different
types of transactions you'll encounter when accepting
credit cards on the internet. An internet transaction
is broken into three types and certain conditions must
be met for an Internet transaction to qualify for the
regular discount rate. If a transaction doesn't qualify,
you will be charged extra for the transaction and the
discount rate will increase.
Here are Visa/MasterCard's rules for Internet transactions:
- QUALIFIED TRANSACTION
Conditions for Internet accounts:
One electronic authorization request is made per transaction
and the transaction/purchase date is the same as the
shipping date.
The authorization code must be included in settled
transaction (this is done automatically by the Nova
Information Systems terminal application).
The authorization request message must include Address
Verification Service (AVS).
The transaction/shipping date must be within 7 calendar
days of the authorization date.
The authorized transaction amount must match the settled
transaction amount.
The settled transaction data must include the merchant's
customer service telephone number, the order or invoice
number, and the total authorized amount.
Additional data is required in the settled transaction
on all Purchasing and Commercial cards at non-T&E
locations (Purchasing card - customer code and sales
tax; Commercial card - sales tax)
The transaction must be electronically deposited no
later than 1 day from transaction date.
Note: the Qualified rate is the rate you will be quoted
by the merchant account provider. This is the normal
discount rate.
- PARTIALLY QUALIFIED TRANSACTION
Conditions for Internet accounts:
One or more of the Qualified conditions were not met.
(OR)
The transaction was electronically deposited more
than 1 day but within 2 days of the transaction/shipping
date. (Will result in a higher discount rate and transaction
fee)
- NON-QUALIFIED TRANSACTION
Conditions for Internet accounts:
One or more of the Qualified or Partially Qualified
conditions were not met. (OR)
The transaction was electronically settled more than
2 days from the authorization date. (OR)
Commercial card, World MasterCard, or Visa Signature
card accepted at a T&E location. (OR)
No additional data in the settled transaction on Purchasing
and Commercial card at non-T&E locations. (Purchasing
Card - customer code and sales tax; Commercial Card
- sales tax). (OR)
Visa Infinite card accepted. (OR)
Transaction was not electronically authorized (voice
authorization) or the authorization code was not included
in the settled transaction.
The customer is using a Corporate or Government-issued
credit card.
The customer is using a credit card issued by a Foreign
Bank. (Will result in a higher discount rate and transaction
fee) |
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We have credit card processing solutions
for you too! Have our knowledgeable sales staff call you to
find how to maximize your credit card selling potential. |
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We can help you cut costs!
Our online secure transaction server eliminates the need for
expensive software.
Why wait? |
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Get the power to expand your
business in the palm of your hand. Now you can accept credit
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