Checklist: Choosing a Vendor to Process Your Online Transactions
BY Aaron Spitzer
If you still haven't decided whether to accept credit cards on your Web site, thefacts speak for themselves: Marketing studies show that you'll lose 60 percent of yourpotential orders if your Web site is not set up to accept credit cards. Not only will youreceive more orders, but those orders will be substantially larger. Credit cardsenable impulse buying, reassure customers of your legitimacy, and simplify your billing.
Here's a seven-point checklist to lead you through the process of obtaining a merchantaccount to allow you to take credit card orders over the Internet:
Understand Merchant Accounts and Their Fees To accept credit cards, you must establish a merchant account, a special bankaccount for handling the revenue (and fees) from credit card transactions. Your merchantaccount provider (MAP) -- a bank or other institution that processes online credit cardtransactions -- will verify the credit card, process the transaction, and deposit theresults into your account, usually within two to four days. In exchange, your MAP will charge yousome combination of the following fees:
Setup fees for opening your account, including application fees, software licensingfees, and equipment purchases.
Transaction fees, a flat fee charged for each transaction.
Discount rates, a percentage taken from each order.
Beyond these fees, many MAPs have also established minimum annual revenue requirements,sometimes as high as $1 million (U.S.). Some MAPS also require security deposits or" revolving" accounts to ensure that you'll pay for any charges that arecontested. Each MAP offers a different mix of fees, but regardless of the MAP, these costscan add up quickly.
Determine the Fee Structure That Maximizes Your ProfitMargin Not every product sells the same way, and not every merchant account provider charges youthe same way; choose a provider that suits your business. Begin by considering the natureof the products you sell -- are they large and expensive? Perhaps then you ought toseek a MAP that offers a higher flat-rate transaction fee and minimizes the discount rate,since even a hefty $1.00 transaction fee will be far lower than a 2.5 percent deductionfrom the charge. On the other hand, if you rely on small, high-volume sales, even a $.30transaction fee can erase your profits.