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 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.