Getting Setup With An Ecommerce Merchant Account

Accepting credit cards is the only easy way to collect payments online. The alternatives are to have someone print something and mail you a check or something like egold which really isn’t a solid solution nor is it convenient. Anything but credit cards online will cause you to lose sales. It’s a convenient way to accept payments and one that you can get without a major hassle.

The discount rate on a typical credit card merchant account is about 2.1% to 2.5%. This is what’s called a qualified discount rate. Paypal doesn’t break these down into qualified or non-qualified rates, they just charge a flat rate of about 2.9% or so. The downside to this is that if you’re a merchant accepting transactions mostly from individual consumers, you’re overpaying on about 80% or more of your transactions.

Traditional merchant accounts have other pricing categories for their discount rates. These are the mid qualified and non-qualified rates. Although the majority of all transactions go through at the qualified rate, the mid and non still have their place when pricing accounts. The mid-qualified rates are typically the rewards cards or other credit cards with some cash back or other incentive associated with them. The non-qualified cards are government or corporate credit cards or in some other way are deemed “risky” such as when the funds aren’t captured until 48 hours or later after the funds were first authorized.

Each transaction also has a cost, no matter how much the volume of the transaction. Makes me laugh sometimes when I buy a $.49 refill at the local convenience store on my credit card because I know that they’re paying at least $.15 to $.18 per transaction if not a bit more which on a $.49 gross volume transaction, they’re probably losing money. No wonder they sometimes just smile and tell me it’s on them. Most internet based transactions run about $.20 to $.30 which is competitive when you compare to Paypal at about $.30 per transaction. Watch for AVS or the gateway transactions as they can easily get their advertised per transaction cost up there.

Batch header fees would probably considered by most merchants one of those “hidden” fees. This is a fee that most merchant don’t ask about and unless they look closely, don’t know about and never question. These batch header fees may be as much as $100 per year or so depending on how often the merchant processes credit cards. What happens is that transactions are batched together usually daily and submitted. Each one of these batches are assessed a batch header fee of about $.25. So, for an easy way to calculate this, if you process transactions every day, you’ll be paying $.25 per day. So, even on your busiest month, this fee wouldn’t exceed $8 per month.

Merchant accounts have monthly fees. Paypal has a monthly fee if you use their merchant services. If you’re just accepting payments from other Paypal customers, you won’t have a monthly fee. But if you use them as you would a traditional merchant account where the payments can come from either Paypal customers or individual cardholders without a Paypal account, you’ll have a $25 monthly fee. Traditional merchant accounts can be as low as $10 to $15 per month including the gateway fee. If you’re an internet business just getting off the ground, try to get your monthly minimum waived. This is usually a $25 minimum and can be pricey especially when you’re just getting started.

If you’re processing over the internet with a traditional account, you’ll need a gateway. Authorize.Net is one of the more popular gateways and although some providers give this away for free, they have costs associated with this and will usually hit you with an annual fee or some other fees along the way to make up for this. Try to negotiate your monthly rates so that they are lower even if you end up paying a little more for the setup. Authorize.Net shouldn’t cost more than about $100 to setup. I’d recommend against leasing as you’d end up paying 5 times as much for the setup over the 48 month lease you’d be stuck with.

Credit card merchant accounts are worth having and with an internet based business pretty much your only real option. There may be a few other ways to get around having to get a credit card merchant account, but not without the expense of losing customers and sales. Make it easy on your customers and yourself by getting setup with an internet merchant account. This can be done easily and without a major hassle. Just follow the above guidelines for pricing and you’ll be fine. Check each contract before you commit. Plan on getting setup about 1-2 weeks before you need to go live. This will give you 2-3 days to get approved and a week or so of testing before you go live.

Brian Armstrong has been setting up ecommerce merchant accounts since 2002. His focus is in not only helping internet businesses get setup with their internet merchant accounts, but also helping internet business owners with some marketing techniques.