Starting your first online store can be an intimidating and overwhelming experience. One such consideration is giving your customers enough choices upon checkout.

But according to a recent report by WebSurveyor, a Herndon, Va. online survey company, one of the reasons why customers abandon a shopping cart is due to “payment issues,” including when the site does not accept their type of credit card. Another survey by Allurent, an Internet commerce applications maker from Cambridge, Mass., found that 37 percent of customers who abandon a shopping cart do so after initiating the checkout process.  

“The more payment options you can provide to customers, the greater the likelihood they’ll purchase something at your site,” says Jeffrey Grau, senior analyst for retail ecommerce at eMarketer, a New York-based research firm. “In addition to credit card payments, you should also offer online payment services, such as PayPal, and even accept checks or money orders -- the more options the better,” adds Grau.

If you’re confused about where to start, consider the following payment pointers.

Credit cards

Small-to-midsized online businesses say they prefer to be paid by plastic over other payment types, according to results of a 2006 survey by Financial Insights, an IDC-owned market research company in Framingham, Mass. A recent survey of nearly 9,000 employees of online merchants in 22 countries found that credit and debit cards -- with familiar brands such as American Express, Visa, MasterCard and JCB -- showed the strongest usage among its customers.

To get started, Visa encourages merchants to visit its site to help Web store owners go through the steps to apply for a merchant account. Basically, you first need to contact an “acquirer,” a merchant bank or other financial institution that grants a merchant account and enables credit card payments from customers.

“My advice to a Web merchant is to use any bank to get started, an institution you already have a relationship is a good idea,” suggests Derek Sivers, rresident of CD Baby, of Portland, Ore. the largest seller of independent music on the Web.

Small businesses that accept credit cards advise that there is an initial cost to the business in terms of fees to the merchant bank or other financial institution. After that, every credit card transaction costs you about 2.5 percent of the sale, plus gateway fees, monthly statement fees, etc. Pricing is set between the merchant and their bank based on the number of services provided, and not negotiated by Visa directly.

Some businesses advise that the fees are only a short-term problem because once you accept credit card payments, your online sales should increase and you may be able to negotiate with banks on fees.  “The point is to simply get a credit card merchant account and live with it for six or 12 months -- and then you can play hardball by pitting multiple banks against one another who want to fight for your business,” says Sivers.

Given the global nature of ecommerce, always ask your bank to let your online store accept all popular card types, including ones that may be popular in other countries such as JCB in Japan and Swift in the United Kingdom. As a merchant, you want to accept as many cards as possible.


In case you missed the Inc Technology article, How PayPal Works for Businesses, PayPal is the world’s leading online payment service with more than more than 114 million accounts globally.

The Financial Insights report found many of the nearly 9,000 surveyed employees of Web merchants said they also prefer to accept PayPal and other secure online payment solutions. According to the eBay Inc.-owned service, and the millions of merchants who rely on it, PayPal is a quick, safe and relatively inexpensive option for those who want to set up online payments for customers.

Merchants can review the different types of accounts at PayPal. The  easiest way to get going is opting for the Website Payments Standard, which simply involves signing up for a PayPal Business Account, verifying your information and then adding a little payment button on the site.

While free to buyers, PayPal merchants must pay a fee to use the service. Transaction fees depend on monthly volume: PayPal charges 2.9 percent + $0.30 USD for PayPal payments between $0 and $3000; 2.5 percent + $0.30 USD for $3001 and $10,000; 2.2 percent + $0.30 USD for $10,001 to $100,000; and 1.9 percent + $0.30 USD for $100,001 and higher. Transaction fees are deducted right away, so when a merchant receives $100, it’s really $97.50 (at 2.2 percent + $0.30 USD). Unlike credit card merchant accounts, PayPal does not charge a set-up fee, gateway fee or any monthly fees.