nocturnalhostin
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Online Merchant Accounts:
Having any type of Merchant Account simply indicates that you can process credit cards, granted by some financial institution (e.g., a bank). This will generally include processing of credit card transactions based on information the merchant collects from the customer and the deposit of funds into ther merchant's business bank account. Nothing more, nothing less. They simply process the charges and give you money - they don't collect information from customers, provide secure real-time collection/processing...for that you need what is called a Gateway Access Provider (although these are required to purchase/lease when you get the online merchant account).
Recomendation for Online Merchant Accounts:
http://www.totalmerchantservices.com/
http://www.charge.com
Gateway Access Providers:
These are providers that will enable a business with a Merchant Account (i.e., Online Merchant Account) to securely (and generally in real-time) process credit card paments and transactions over the Internet. While the Gateway Access Provider is quite seperate from the Mercahnt Account, any Online Merchant Account will require the purchase or lease of service from a Gateway Access Provider. Typical "Merchant Accounts" require the purchase or lease of either a Gateway Access Provider or a physical Credit Card Scan Terminal device (basaicly that thing that you swipe your credit card through at the store). Examples of Gateway Access providers are the commonly heard Authorize.Net and Verisign. Most Merchants Accounts will actually have one of these two providers included with their setup costs, or offer a choice between them with the additional cost listed for each.
Recomended Gateway Access Provider:
http://www.authorize.net
The bigest and number one gateway provider without question.
What are 3rd Party Merchant Accounts:
These are the companies like PayPal, 2CheckOut, Ibill, cBill, etc. They are companies that can accept credit card orders on behalf of you or your company. Basaiclly, you don't need your own Online Merchant Account or Gateway Access Provider, you are simply using (piggybacking) off of theres. Although they typicaly charge higher percentage rates, monthly fees, or setup fees, these are in general less than the cost of the gateway and statement fees and inital setup of a true Online Merchant Account when a business does not plan on doing a large volume of sales or is just staring out.
One of the other advantages of a 3rd party account (for your customers) is that these companies provide an additional (and sepeate) level of protection - not only can they contact you to resolve a billing dispute, they can contact the 3rd party processor, and then finally their credit card company or bank if all else fails.
Recomendation for a 3rd Party Merchant Account:
http://www.2checkout.com/
How to Choose Merchant Account or 3rd Party?
The general rule is that you start with 3rd party and move to Merchant Accounts when you generate (consistantly) over a thousand dollars in sales - the reason being that this is the point where the percentage discount provided by Merchant Accounts makes it worth their setup fees - although this is based on pure numbers - many business will have their own merchant account but still over 3rd party for the convience of their customers or simply because they paid an inital price and there aren't any monthy fees associated with it. There is also the whole debate about chargebacks...but I won't get into that debate...
What to stay away from?
I-GOLD .... some people like it, but I think its stupid. Your customers have to pay a premium to deposit money into the account and can only do so through various 3rd parites that they have to randomly pick one of - all for the "pleasure" of saying that the deal in online gold thats backed by real gold sitting in a vault some where. Great advertising gimic, totally stupid and dosent do anything but rip off your customers. Accept it if you want, but I'd never do business with a company that even offers this type of payment ...
Explaining the Terminology that goes along with Merchant Accounts
All prices are typical
Application/Setup Fee:
$0-$250 (one time fee)
Most providers have some type of application or setup fee. Those that advertise NO SETUP FEE! are going to end up charging you either a setup or lease fee for the gateway system that is higher than normal or are going to charge you higher than normal rates or other monthly fees.
Hardware/Software:
$0-$1000 (own, one time) or $0-$50 (lease, monthly)
These are the secure gateways (authorize.net) service providers or hardware (credit card termianls) that are required with/to use the merchant account. It should be obvious that if one plans on staying in business for a considerable period of time that leases are out of the quesiton from a simple view of the numbers.
Programing:
$0-$250
This is mostly for those merchants that do in person transactions and have to have a credit card terminal programed, so we don't really have to worry about this. The other reason for this chage would be changing from one merchant provider to another (so they get to make more money off of you since if you bring your own equipment they dont get to charge you for it).
Discount Rate:
2.00% - 4.00% (per transaction)
This is the percentage that is deducted from the purchase cost and gets "gobbled up" by the bank or other mercahnt account insittution. These rates are for Mail Order/Telephone Order (MOTO) and Internet-based businesses. Between 2% and 2.5% for internet is reasonable these days.
Non-US businesses will pay a higher discount rate closer to the 3% to 4% range.
Important Note: Don't let slight variations be the deciding factor between two providers. For example, if one provider charges 2.05% and another charges 2.25% you'll only save $0.20 for every $100 processed. Look at all your monthly fees and the service the provider gives you instead.
Transaction fee:
$0-$0.50 (per transaction)
$0.20 - $0.50 per transaction
In addition to the discount rate a transaction fee is also deducted from the purchase price. Also, just as with discount rates, transaction fees are lower for retail businesses while slightly higher amounts are charged for MOTO and Internet establishments. Address Verification (AVS) may either cost an additional fee, or may be included in the base transaction fee.
Monthly Minimum:
$0-$25 (per month)
The fee is based on your transaction and discount rate fees from your credit card sales each month. For instance, say your bank charged $25 as a monthly minimum, the transaction and discount rate fees collected by the bank must equal or go over $25 each month. If this is the case no monthly minimum will be charged. However, if the fees collected for that month do not meet the $25 minimum, you will then be charged the difference. Not all processors have a monthly minimum fee, however most do. (They love to get money one way or another, hehe).
Gateway Access Fee:
$0-$20 (monthly, count on $10 avg)
Monthly fee that goes to your gateway provider (above and beyond the intial or lease payment and setup/programing) to keep their nice service running. Think of it as an access or use fee...
Statement Fee:
$0-$15 (monthly)
At the end of the month you get a statement from the bank or other finanical insitution providing the merchant account. Kind of like the one you get for your checking account, but they charge you for it.
Address Verification System (AVS):
$0-$0.05 (per transaction)
AVS verifies that the billing address given by the customer matches the credit card that is used by the customer. If you (as the merchant) opt not to use AVS, VISA and MasterCard will not like you and will charge you an additional 0.17% to 1.25% on those sales. Most merchant accounts come with AVS at no extra charge. If there is a charge, it is combined in with the per transaction fee in most cases. The AVS service works only with US credit card holders. Currently, there is no AVS service in place for non-US credit card holders. AVS simply cuts down on fraud (and thus charge backs) which is why credit card providers will become angry with you and charge your more if you don't use it - it makes their business more risky and costs them more - so they take it out on you. Isn't it nice how merchants get everything and the only anti-fraud tool we get from the credit card companies is AVS? Geeze...ok, that last comment is a personal remark - but its still true none the less.
Chargeback:
$5-$50 (per instance)
This is when the custoemr disputes the charge and wants there money back. Count on the merchant account immediatly seizing funds from your bank account and charging you this fee (even if it dosent goto the csutomer, the merchant account still siezes it most of the time up front from you). Also, keep in mind that this is siezed from your BANK account at a later date. Assume that a customer buys $1000 from you, you spend this to pay server bills, customer disputes it next week and merchant account takes $1000 out of your bank account, even if it isn't there - leaving you with -$1000 balance, probably $100 in NSF fees, marks on credit report, ARGH!!!!!
Reserve:
Vearies, ask provider
Some providers require you to have a reserve account with them based on your anual sales - this is so that if you don't use the merchant account provider as the bank, and a charge back happens like above, and your 3rd party bank refuses to give them the money (e.g., not in account and they don't want you to have a negative balance), they get to take it from your reserve account.
Anual Fee:
$0-$100 (per year)
Soem credit card processors charge this as another way to make money (and list lower setup fees, etc.)
Having any type of Merchant Account simply indicates that you can process credit cards, granted by some financial institution (e.g., a bank). This will generally include processing of credit card transactions based on information the merchant collects from the customer and the deposit of funds into ther merchant's business bank account. Nothing more, nothing less. They simply process the charges and give you money - they don't collect information from customers, provide secure real-time collection/processing...for that you need what is called a Gateway Access Provider (although these are required to purchase/lease when you get the online merchant account).
Recomendation for Online Merchant Accounts:
http://www.totalmerchantservices.com/
http://www.charge.com
Gateway Access Providers:
These are providers that will enable a business with a Merchant Account (i.e., Online Merchant Account) to securely (and generally in real-time) process credit card paments and transactions over the Internet. While the Gateway Access Provider is quite seperate from the Mercahnt Account, any Online Merchant Account will require the purchase or lease of service from a Gateway Access Provider. Typical "Merchant Accounts" require the purchase or lease of either a Gateway Access Provider or a physical Credit Card Scan Terminal device (basaicly that thing that you swipe your credit card through at the store). Examples of Gateway Access providers are the commonly heard Authorize.Net and Verisign. Most Merchants Accounts will actually have one of these two providers included with their setup costs, or offer a choice between them with the additional cost listed for each.
Recomended Gateway Access Provider:
http://www.authorize.net
The bigest and number one gateway provider without question.
What are 3rd Party Merchant Accounts:
These are the companies like PayPal, 2CheckOut, Ibill, cBill, etc. They are companies that can accept credit card orders on behalf of you or your company. Basaiclly, you don't need your own Online Merchant Account or Gateway Access Provider, you are simply using (piggybacking) off of theres. Although they typicaly charge higher percentage rates, monthly fees, or setup fees, these are in general less than the cost of the gateway and statement fees and inital setup of a true Online Merchant Account when a business does not plan on doing a large volume of sales or is just staring out.
One of the other advantages of a 3rd party account (for your customers) is that these companies provide an additional (and sepeate) level of protection - not only can they contact you to resolve a billing dispute, they can contact the 3rd party processor, and then finally their credit card company or bank if all else fails.
Recomendation for a 3rd Party Merchant Account:
http://www.2checkout.com/
How to Choose Merchant Account or 3rd Party?
The general rule is that you start with 3rd party and move to Merchant Accounts when you generate (consistantly) over a thousand dollars in sales - the reason being that this is the point where the percentage discount provided by Merchant Accounts makes it worth their setup fees - although this is based on pure numbers - many business will have their own merchant account but still over 3rd party for the convience of their customers or simply because they paid an inital price and there aren't any monthy fees associated with it. There is also the whole debate about chargebacks...but I won't get into that debate...
What to stay away from?
I-GOLD .... some people like it, but I think its stupid. Your customers have to pay a premium to deposit money into the account and can only do so through various 3rd parites that they have to randomly pick one of - all for the "pleasure" of saying that the deal in online gold thats backed by real gold sitting in a vault some where. Great advertising gimic, totally stupid and dosent do anything but rip off your customers. Accept it if you want, but I'd never do business with a company that even offers this type of payment ...
Explaining the Terminology that goes along with Merchant Accounts
All prices are typical
Application/Setup Fee:
$0-$250 (one time fee)
Most providers have some type of application or setup fee. Those that advertise NO SETUP FEE! are going to end up charging you either a setup or lease fee for the gateway system that is higher than normal or are going to charge you higher than normal rates or other monthly fees.
Hardware/Software:
$0-$1000 (own, one time) or $0-$50 (lease, monthly)
These are the secure gateways (authorize.net) service providers or hardware (credit card termianls) that are required with/to use the merchant account. It should be obvious that if one plans on staying in business for a considerable period of time that leases are out of the quesiton from a simple view of the numbers.
Programing:
$0-$250
This is mostly for those merchants that do in person transactions and have to have a credit card terminal programed, so we don't really have to worry about this. The other reason for this chage would be changing from one merchant provider to another (so they get to make more money off of you since if you bring your own equipment they dont get to charge you for it).
Discount Rate:
2.00% - 4.00% (per transaction)
This is the percentage that is deducted from the purchase cost and gets "gobbled up" by the bank or other mercahnt account insittution. These rates are for Mail Order/Telephone Order (MOTO) and Internet-based businesses. Between 2% and 2.5% for internet is reasonable these days.
Non-US businesses will pay a higher discount rate closer to the 3% to 4% range.
Important Note: Don't let slight variations be the deciding factor between two providers. For example, if one provider charges 2.05% and another charges 2.25% you'll only save $0.20 for every $100 processed. Look at all your monthly fees and the service the provider gives you instead.
Transaction fee:
$0-$0.50 (per transaction)
$0.20 - $0.50 per transaction
In addition to the discount rate a transaction fee is also deducted from the purchase price. Also, just as with discount rates, transaction fees are lower for retail businesses while slightly higher amounts are charged for MOTO and Internet establishments. Address Verification (AVS) may either cost an additional fee, or may be included in the base transaction fee.
Monthly Minimum:
$0-$25 (per month)
The fee is based on your transaction and discount rate fees from your credit card sales each month. For instance, say your bank charged $25 as a monthly minimum, the transaction and discount rate fees collected by the bank must equal or go over $25 each month. If this is the case no monthly minimum will be charged. However, if the fees collected for that month do not meet the $25 minimum, you will then be charged the difference. Not all processors have a monthly minimum fee, however most do. (They love to get money one way or another, hehe).
Gateway Access Fee:
$0-$20 (monthly, count on $10 avg)
Monthly fee that goes to your gateway provider (above and beyond the intial or lease payment and setup/programing) to keep their nice service running. Think of it as an access or use fee...
Statement Fee:
$0-$15 (monthly)
At the end of the month you get a statement from the bank or other finanical insitution providing the merchant account. Kind of like the one you get for your checking account, but they charge you for it.
Address Verification System (AVS):
$0-$0.05 (per transaction)
AVS verifies that the billing address given by the customer matches the credit card that is used by the customer. If you (as the merchant) opt not to use AVS, VISA and MasterCard will not like you and will charge you an additional 0.17% to 1.25% on those sales. Most merchant accounts come with AVS at no extra charge. If there is a charge, it is combined in with the per transaction fee in most cases. The AVS service works only with US credit card holders. Currently, there is no AVS service in place for non-US credit card holders. AVS simply cuts down on fraud (and thus charge backs) which is why credit card providers will become angry with you and charge your more if you don't use it - it makes their business more risky and costs them more - so they take it out on you. Isn't it nice how merchants get everything and the only anti-fraud tool we get from the credit card companies is AVS? Geeze...ok, that last comment is a personal remark - but its still true none the less.
Chargeback:
$5-$50 (per instance)
This is when the custoemr disputes the charge and wants there money back. Count on the merchant account immediatly seizing funds from your bank account and charging you this fee (even if it dosent goto the csutomer, the merchant account still siezes it most of the time up front from you). Also, keep in mind that this is siezed from your BANK account at a later date. Assume that a customer buys $1000 from you, you spend this to pay server bills, customer disputes it next week and merchant account takes $1000 out of your bank account, even if it isn't there - leaving you with -$1000 balance, probably $100 in NSF fees, marks on credit report, ARGH!!!!!
Reserve:
Vearies, ask provider
Some providers require you to have a reserve account with them based on your anual sales - this is so that if you don't use the merchant account provider as the bank, and a charge back happens like above, and your 3rd party bank refuses to give them the money (e.g., not in account and they don't want you to have a negative balance), they get to take it from your reserve account.
Anual Fee:
$0-$100 (per year)
Soem credit card processors charge this as another way to make money (and list lower setup fees, etc.)
