Friday, July 27. 2007
Internet Merchant Account Provider: Finding a Diamond in the Rough
The Internet has changed the way people shop. Several surveys indicate that almost 80% of buyers prefer shopping online for a variety of needs. The average for online shopping is the highest in the US standing at 70% and that is way above the global average.
Now convenience is the hallmark of online buying. An essential aspect of providing a pleasant and convenient shopping experience for your customers is to offer the option to pay by credit card.
It is not possible or practical for you to have direct commercial contact with all credit card companies. You need an intermediary - a merchant account provider.
What are merchant account providers?
Merchant account providers offer their services to businesses by coordinating the entire credit card transaction cycle. They free you of the hassle of following up with each card processing company. Most importantly, they ensure you receive your payments. While obviously these service providers bring great advantages, there are a few points you need to keep in mind when choosing one.
How to choose an Internet merchant account provider?
·
Do an evaluation of your needs. Ask yourself the following questions: Are you a high volume or low volume business? Do you wish real-time payment processing or manual processing? How much cost of processing could you load on to your final price?
· Generally, the set up costs of starting a merchant account depend on the number of nodes in the transaction cycle. The higher the number, the more cost. Attempt to reduce this by finding a one-stop service provider. Do not hesitate to negotiate a reduction or waiver of set up fees.
· Look out for transaction fees. The discount rate is the percentage that the provider charges (generally over 2% for Internet accounts) for each transaction. The transaction fee is the accompanying transaction charge, often between 20 and 40 cents. Usually, for low-price, high-volume sales, choose a provider with low transaction fees. Of course, compare the discount percentage as well between providers, especially the non-qualified discount fee. (A non-qualified transaction fee will be charged if you accept a foreign, government, corporate or certain rewards cards.)
· Beware of monthly minimum fees. If you do not attain a certain amount in credit card processing transaction volume, you will pay the difference between the monthly minimum figure and what you have reached in processing transaction costs. Talk about throwing money out the window! A high monthly minimum fee may diminish your overall profit.
· Your internal resources in terms of technical preparedness are a critical element. Put in place the shopping cart and then choose the provider that would integrate with the store. Look for gateways, such as Authorize.net, that are compatible with most shopping carts. Payment gateways are needed to securely process payments. Many Internet merchant account providers offer integrated solutions. Compare the costs carefully because often times you are led to a low cost account only to be charged higher for other features. Beware of hidden fees!
· Consider the settlement time for receiving the payment. Obviously, the sooner you get your money, the better it is for you.
· The chargeback fee is another important element of cost when scouting for a merchant account provider. An Internet merchant account provider typically assesses a chargeback fee for customer claims, genuine or otherwise. To effectively tackle such cases, you as the trader should ensure that the charge appearing on the customer’s bill is recognizable to him.
Remember, there is no such thing that does not come without negotiation. You should understand your business perfectly, negotiate your stand with conviction and get the lowest Internet merchant account fee provider. Good luck!
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To learn more about our merchant account services, please visit us at http://www.intelli-collect.com.
Saturday, July 21. 2007
Merchant Account for Artisans: Use Your Creativity to Find the Right Merchant Account
Artisans are creative people and need the right merchant account that can address their creative needs. As an artisan, you do not generally fall into high volume selling category, rather you are more likely to undertake less sales with high margins. Your average transactions per month (the approximate number of transactions that you expect to process every month) may be low, but the average ticket size (the amount of money that an average customer may spend on your web site) is quite high.
GENERAL CLASSIFICATION OF MERCHANTS
Mega Merchants, are those who have a high monthly volume (say, 800 transactions) and high ticket sales (say $200).
Super Merchants, are those who have a low monthly volume (say, 5 transactions) and very high ticket sales (say $5000).
Bargain Merchants, are those who have a high monthly volume (say, 600 transactions) and low ticket sales (say $15).
Average Merchants, are those who have a medium monthly volume (say, 220 transactions) and medium ticket sales (say $45).
Mini Merchants, are those who have a low monthly volume (say, 20 transactions) and low ticket sales (say $15).
Based on the above classification, artisans may generally be classified as super merchants (famous artisans), average merchants (not-so-famous artisans), and mini merchants (struggling artisans).
LOOKING BEYOND PAYPAL
Here, let us compare a true merchant account with a third party merchant account, namely PayPal Basic, on the basis of cost, to arrive at a reasonable conclusion.
Although rates vary, yet generally, a true merchant account may have the following charges:
Setup fee: nil
Gateway setup fee: $99.00
Discount rate: 2.20%
Transaction fee: 30¢
Monthly fee: $10.00
Gateway monthly fee: $15.00
PayPal basic has the following charges based on monthly volume:
A monthly volume of less than $3,000:
Setup fee: nil
Gateway setup fee: nil
Discount rate: 2.90%
Transaction fee: 30¢
Monthly fee: nil
Gateway monthly fee: nil
A monthly volume of greater than $3,000, but less than $10,000:
Setup fee: nil
Gateway setup fee: nil
Discount rate: 2.50%
Transaction fee: 30¢
Monthly fee: nil
Gateway monthly fee: nil
A monthly volume of greater than $10,000, but less than $100,000:
Setup fee: nil
Gateway setup fee: nil
Discount rate: 2.20%
Transaction fee: 30¢
Monthly fee: nil
Gateway monthly fee: nil
A monthly volume of greater than $100,000:
Setup fee: nil
Gateway setup fee: nil
Discount rate: 1.90%
Transaction fee: 30¢
Monthly fee: nil
Gateway monthly fee: nil
CALCULATIONS
For Super Merchants (famous artisans) having a low monthly volume (say, 5 transactions) and high ticket sales (say $5000). Then the total number of transactions would be 5 and the total selling amount would be ($5000 x 5) $25,000 per month.
A true merchant account in the first month would cost:
Setup fee: nil
Gateway setup fee: $99
Discount rate: (assuming 2.20% of $25,000) $550
Transaction fee: (assuming 5 transactions @ 30¢) $1.50
Monthly fee: $10.00
Gateway monthly fee: $15.00
Total cost at the end of 1 month: $675.50
True merchant account in the second and subsequent months would cost:
Setup fee: nil
Gateway setup fee: nil
Discount rate: (assuming 2.20% of $25000) $550
Transaction fee: (assuming 5 transactions @ 30¢) $1.50
Monthly fee: $10.00
Gateway monthly fee: $15.00
Total cost at the end of 2 month: $576.50
PayPal basic in the first month would cost:
Setup fee: nil
Gateway setup fee: nil
Discount rate: (assuming 2.20% of $25000) $550
Transaction fee: (assuming 5 transactions @ 30¢) $1.50
Monthly fee: nil
Gateway monthly fee: nil
Total cost at the end of 1 month: $551.50
PayPal basic in the second and subsequent months would cost:
Setup fee: nil
Gateway setup fee: nil
Discount rate: (assuming 2.20% of $25000) $550
Transaction fee: (assuming 5 transactions @ 30¢) $1.50
Monthly fee: nil
Gateway monthly fee: nil
Total cost at the end of 2 month: $551.50
For Average Merchants (not-so-famous artisans) having a medium monthly volume (say, 220 transactions) and medium ticket sales (say $45). Then the total number of transactions would be 220 and the total selling amount would be ($45 x 220) $9,900 per month.
A true merchant account in the first month would cost:
Setup fee: nil
Gateway setup fee: $99
Discount rate: (assuming 2.20% of $9,900) $217.80
Transaction fee: (assuming 220 transactions @ 30¢) $66
Monthly fee: $10.00
Gateway monthly fee: $15.00
Total cost at the end of 1 month: $407.80
True merchant account in the second and subsequent months would cost:
Setup fee: nil
Gateway setup fee: nil
Discount rate: (assuming 2.20% of $9,900) $217.80
Transaction fee: (assuming 220 transactions @ 30¢) $66
Monthly fee: $10.00
Gateway monthly fee: $15.00
Total cost at the end of 2 month: $308.80
PayPal basic in the first month would cost:
Setup fee: nil
Gateway setup fee: nil
Discount rate: (assuming 2.50% of $9,900) $247.50
Transaction fee: (assuming 220 transactions @ 30¢) $66
Monthly fee: nil
Gateway monthly fee: nil
Total cost at the end of 1 month: $313.50
PayPal basic in the second and subsequent months would cost:
Setup fee: nil
Gateway setup fee: nil
Discount rate: (assuming 2.50% of $9,900) $247.50
Transaction fee: (assuming 220 transactions @ 30¢) $66
Monthly fee: nil
Gateway monthly fee: nil
Total cost at the end of 2 month: $313.50
For Mini Merchants (struggling artisans) having a low monthly volume (say, 20 transactions) and low ticket sales (say $15). Then the total number of transactions would be 20 and the total selling amount would be ($15 x 20) $300 per month.
A true merchant account in the first month would cost:
Setup fee: nil
Gateway setup fee: $99
Discount rate: (assuming 2.20% of $300) $6.60
Transaction fee: (assuming 20 transactions @ 30¢) $6
Monthly fee: $10.00
Gateway monthly fee: $15.00
Total cost at the end of 1 month: $136.60
True merchant account in the second and subsequent months would cost:
Setup fee: nil
Gateway setup fee: nil
Discount rate: (assuming 2.20% of $300) $6.60
Transaction fee: (assuming 20 transactions @ 30¢) $6
Monthly fee: $10.00
Gateway monthly fee: $15.00
Total cost at the end of 2 month: $37.60
PayPal basic in the first month would cost:
Setup fee: nil
Gateway setup fee: nil
Discount rate: (assuming 2.90% of $300) $8.70
Transaction fee: (assuming 20 transactions @ 30¢) $6
Monthly fee: nil
Gateway monthly fee: nil
Total cost at the end of 1 month: $14.70
PayPal basic in the second and subsequent months would cost:
Setup fee: nil
Gateway setup fee: nil
Discount rate: (assuming 2.90% of $300) $8.70
Transaction fee: (assuming 20 transactions @ 30¢) $6
Monthly fee: nil
Gateway monthly fee: nil
Total cost at the end of 2 month: $14.70
ANALYSIS
Based on the above data, the following table is made.
Super merchant Average merchant Mini merchant
(famous artisans) (not-so-famous artisans) (struggling artisans)
Cost for 1 month
Merchant Account $675.50 $407.80 $136.60
PayPal Basic $551.50 $313.50 $14.70
Cost for 2 month
and subsequent
months
Merchant Account $576.50 $308.80 $37.60
PayPal Basic $551.50 $313.50 $14.70
From the above table, it is clear that for struggling artisans, PayPal basic is the best option. However, for famous and not-so-famous artists, from the second month onwards, the difference in a true merchant account and PayPal basic is not an appreciable difference.
CONCLUSIONS
Considering the advantages offered by a true merchant account like having the funds deposited directly into your account, having full control of the account, ability to send refunds, negotiating chargebacks effectively, and having your own name reflected in the customer's credit card statement, far outweighs the little difference in the cost between a true merchant account and PayPal. Other advantages over PayPal that a true merchant account has are the abilities to accept payment over a variety of media, like Internet, Wi-Fi, DialPay, and keying in transactions over a physical or a virtual terminal. You may choose whichever method of payment that best suits your needs. For example, if you are traveling with your crafts and need to accept payment, where Internet connection may not be possible, then PayPal would be of no use at all. At such times, you can use your mobile phone to accept payment via the DialPay facility offered by the true merchant account provider. In view of the above, it may be concluded that for famous and not-so-famous artisans, having their own merchant account is much more profitable in the long run; whereas for a struggling artisan, PayPal basic or other third party merchant account providers would be the ideal option. Moreover, having your own merchant account acts also as a status symbol, which goes along with famous or not-so-famous artisans like a glove goes with a hand.
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To learn more about our merchant account services, please visit us at http://www.intelli-collect.com.
Friday, July 13. 2007
Free Internet Merchant Account: Jumpstart Your Online Transactions
Many Internet business owners need to implement an e-commerce mechanism to receive payment from customers. An Internet merchant account facilitates the transfer of funds from customer to merchant, offering a fast, effective and reliable payment gateway integrated with the merchant’s shopping cart/website. A payment gateway, such as Authorize.net, offers security and confidentiality, crucial to the success and goodwill of a merchant’s brand.
Is ‘free’ really ‘free’?
However, with the multitude of merchant account programs available in cyberspace, how do you pick the ones that are genuine? Many merchant account providers lure unsuspecting online customers by offering so called “free” accounts. The “free” part of it may only be referring to the initial cost of the payment gateway that is offered. However, there are bound to be other charges and such fees must be disclosed. Therefore, you should be aware of all relevant charges while obtaining a “free” Internet merchant account.
Possible hidden charges involved
So what are the potential hidden charges involved? Some of the hidden charges involved include:
· Chargeback fees – which typically refer to fees paid when the merchant encounters a chargeback or a dispute initiated by the customer calling his/her card-issuing bank. The fee will be charged irrespective of whether it is a successful chargeback or not.
· Retrieval fees- This is another fee most free Internet merchant account providers will charge. This fee is basically assessed when the customer cannot recall the transaction and/or the card-issuing bank needs transaction order information. Generally, the merchant has 10 days to comply with this retrieval request or a chargeback ensues. Often, any customer dispute engenders both a chargeback and retrieval fee charged to the merchant – even if the merchant wins the chargeback!
· Non-qualified fees – These fees are applied when a particular transaction downgrades because of the type of card that your customer presented. For example, corporate, government or foreign cards may be accessed at a non-qualified rate, as well as certain rewards cards. Moreover, if the customer’s billing address does not match the address listed on the credit card, an AVS mismatch occurs leading to a non-qualified fee.
· Termination fees – These fees are usually charged if the merchant ends the contract with the Internet merchant account provider, within a specified period of time.
Some of the other fees free Internet merchant account providers charge include monthly gateway fees, hidden charges for setup costs, fees for voice authorization, setup charges for bank setup, fees for licensing and software, annual fees, fees required for technical support, over limit fees, etc.
How to avoid these charges?
There is no foolproof method to detect all hidden charges initially because most of the so-called free Internet merchant account providers are going to be selective in what they tell an inquiring merchant. However, your best shot at avoiding these fees is to be familiar with the verbiage or terms used in the merchant account industry and then scrutinize the merchant account statement (beginning with the first statement), when you receive it. This can be a tedious and time-consuming process but well worth the effort.
Most of the free Internet merchant account providers will try their best to send you very complex statements that you may not be able to follow. Therefore, try to obtain the services of a reliable, trustworthy source who will be able to analyze the statements and figure out applicable hidden charges, if any. That way, you save yourself from paying an unnecessary sum of money in the future.
How to detect ‘scams’?
Use your burgeoning knowledge of the merchant account field and use good, old-fashioned intuition. Get a sense of your agent and what he/she seems to “represent.” Is a non-qualified fee disclosed without asking the rate? Is a batch fee discussed? Did the agent broach the subject of termination fees? If the merchant account provider does not outline all these applicable fees and more, then the company does not deserve your business.
Of course, it is always safest and best to opt to utilize the services of a merchant account provider that has no termination fee when selecting an Internet merchant account. (Make sure that a no termination fee stipulation is in the contract that you sign!) If hidden fees start to appear after you have signed your contract, you can then cancel the account without penalty.
Remember, there is no such thing as a “free account” because the Internet merchant account provider needs to be able to make a profit somewhere. Just make sure that the merchant account provider does not profit at your expense!
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To learn more about our merchant account services, please visit us at http://www.intelli-collect.com.
Friday, July 6. 2007
Merchant Account for Your Online Auction Business: The Highs and Lows of Accepting Credit Card Payments
On one end of the auction business is Christie's, Sotheby's, etc., world-famous auction houses, where fine art and high living fuse seamlessly. All of them have gone online and now the bourgeois gentry can view the items and make their purchases online via credit cards. However, since the gentry of Sotheby's is only by invitation, Sotheby's has developed two products, Sotheby's World Elite MasterCard and Sotheby's World MasterCard, which are issued by GE Money Bank pursuant to license by MasterCard International Incorporated. Applications for these prestigious credit cards are not accepted, as they are given out by invitation to few chosen customers on a worldwide basis, according to the discretion of Sotheby's. This ensures that the cards are no-limit cards, there are no chargebacks, no refunds, and a high level of satisfaction is maintained among its distinguished customers. Sotheby's, along with other famous auction houses like Christie's, Bonhams, Lyon & Turnbull, etc., rely on their own merchant account and their own customized credit cards. If you happen to be a high profile auction merchant, then you have already placed your goods for sale, or you have bid on their exclusive, rare, and expensive items.
On the other end of the spectrum, the world's largest online virtual auction house eBay is open to everyone and accepts payment via credit cards or PayPal (which is an eBay company). Almost anything and everything can be sold on eBay. If you have an online auction business, then most probably you trade with high frequency at eBay and rely heavily on PayPal. You may convert your eBay store into a full-fledged online business with ProStores, another eBay company. However, there are some drawbacks to this approach, in the sense that both the buyers and sellers must have PayPal accounts. Your account may also be restricted due to some minor problems, and you as a seller have no control over chargeback disputes. You may also try out a hybrid merchant account like ProPay. This gives you the look of a traditional merchant account, as the merchant can validate the customer, the transaction can be completed online, and there are no monthly minimums, monthly fees, or statement fees. The disadvantage is that there are high transaction fees and has limits on the amount of money that can be successfully processed (ProPay limit is $250 per item and total $1,000 per month). The limits can be lifted but with signing up for a different account and making a large deposit.
Recently another sort of payment system has come, which is usually called as a dynamic merchant account. This is an adjustable merchant account that grows as your business grows. You start with no charges except variable per-transaction fees, whose rate grows higher with higher transactions. Later as your business grows, you can easily switch to another plan that has a small monthly minimum and lower fixed per-transaction fees and a fixed medium discount rate. As your business grows further, you can switch to a traditional merchant account with a higher monthly minimum and lowest fixed per-transaction fee and fixed low discount rate. Many merchant account providers provide such accounts. They come with anti-fraud techniques like CVV and AVS. Disputes are handled directly between the issuing card and yourself. The limits are usually $5,000 per month, which is a very generous limit. They also give a trial period during which you can make up your mind and decide whether you would like to go for it or not. The annual fee is usually from $25 to $50 and the transaction fee is usually from 30 cents to 50 cents per transaction. These types of dynamic merchant accounts are the fashion these days with small and newer online auction businesses, and it may stand the test of time.
Ultimately, with the passage of time, a stage arrives when you need to upgrade yourself to a full-fledged merchant account, as you need to present multiple payment options to your customers. This includes building your own Internet site or mini-site, which can accept online credit card payments. You also have to utilize the services of a payment gateway that can directly link to your auction store at different auction markets like eBay, uBid, Bidz, etc. You may provide the option of DialPay, if the transaction volume is not too high. The option of deferred processing may also be undertaken, where you can input the credit card information in a virtual or physical terminal, later at your convenience. Providing these features enables you to expand your customer base and retain your leadership position.
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To learn more about our merchant account services, please visit us at http://www.intelli-collect.com.