If you’re ready to launch an e-commerce enterprise, you’re going to have to obtain a credit card processing service.  The question arises: Can you secure credit card processing capability without a merchant account?

The answer is “Yes” as another option exists.  While most online merchants opt to open their own merchant account, the trend has been changing slightly over the past few years as some are touting the derived benefits from third party processors.

However, after doing some research on the costs, using a third party credit card processing service instead of a merchant account is really only the best option for businesses that have low monthly sales volume.  (Many third party processors waive fixed costs, such as the setup and monthly fees.)  If you plan on selling a fair amount of products or services, make sure you do your homework to find the best deal for your venture, particularly keeping an eye on the discount percentage that is assessed for each transaction.

Upon closer examination, using a third party credit card processing service instead of your own merchant account has its advantages and disadvantages, and you will need to see which outweighs the other when deciding which credit card processor to choose. 

First off we will look at the benefits of third party services:

It’s often faster and simpler to sign with a third party than a merchant account and it generally requires no initial investment to do so;

Merchants with bad credit can readily secure third party processing services;

If your business has a low volume of monthly sales, it’s likely that you’ll save a bit of money by using a third party service in the absence of monthly and monthly minimum fees.

These services generally handle a decent percentage of any customer support credit card processing requirements and most services will refund any processing fees you have paid if customers decide to return any products. 

However, on the other side of the coin, there are several disadvantages of going with a third party service:

The credit card processing fees are usually higher than merchant accounts as they often fall in the 4 to 10 per cent range, compared with 2 to 4 per cent charged by merchant account providers. This means once your business takes off and monthly sales increase, you’ll likely end up paying higher fees with a third party service;

Third party services often pay your net sales proceeds every few weeks, while merchant account providers usually pay them within a few days;

Some third party services hold back a percentage of your sales to cover themselves in case of any chargeback claims from customers. Merchant account providers may do this, but it’s generally only implemented with high risk merchants;

Third party processors are more likely to freeze accounts (and for a longer period of time) when returns, and especially chargebacks, materialize; 

What you’re selling may also affect your decision as third party services generally only like to involve themselves with tangible products and/or digital products that customers can download directly from a seller’s website. They don’t usually get involved with services; 

Some third party services may also charge a membership fee along with a fee for each new product you decide to sell;  

Merchant accounts allow you to gather and access more customer information as they supply the personal details to you.  Customer information is more limited with third party services;

In most instances, you will have to use a third party’s shopping cart system. This means you won’t really have any input over the system’s overall look and feel.

Most customers don’t like to be transferred out of a seller’s site to enter their credit card and personal information to third party services. Some customer’s would rather cancel their order than go through this process as they are often worried about adequate security.

All in all, the disadvantages seem to outweigh the advantages when it comes to using third party services. However, if you’re only planning on selling a few items per month or are treating it as a part time business this option may be a viable one.

In your final analysis, when you include and figure out all of the percentages, charges and fees on items sold, businesses that plan on selling a fair amount of goods are better off with a merchant account provider as it should definitely save some money in the long run.  Indeed, you may incur a long term loss should you opt to obtain credit card processing without a merchant account.

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 To learn more about our merchant services, please visit http://www.intell-collect.com