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.
Pricing merchant accounts starts with the discount rate. Everybody always asks for this rate when comparing merchant accounts. For internet based transactions, the discount rate will typically be about 2.1 to 2.5%. Paypal is a merchant account provider that charges a flat rate of about 3%. Even though this may seem to be easier to reconcile, it will ultimately cost most merchants more money simply because 80% or more of your transactions should go through at that lower qualified rate.
A non-qualified or mid-qualified rate will usually add on an additional .5% to 1.5% for these transactions that are "downgraded" because they are either a rewards card which cost more to process or a government or business credit card.
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.
Your more traditional merchant account has what are called "batch header fees" which is a daily processing fees. Transactions are batched together, usually daily. Each of these batches is assessed a $.25 batch header fee. So if you process batches every day for 30 days, you'd have about $8 or so worth of "batches" that you'd be paying for. This is one small advantage of Paypal merchant services is that they don't have this batch header fee. This is a fee that you should be able to negotiate with your service provider.
Monthly fees include an account maintenance fee or statement fee. Often called something like a customer service fee, etc. These fees are usually only one monthly fee of $5 to $10 or so. If at all possible, work with your merchant service provider to waive the monthly minimum. This monthly minimum fee is usually about $25 or so and if you're not processing transactions, will be very expensive. Even though not processing usually means you'll be going out of business soon anyway, paying an extra $25 worth of minimum every month is often more hassle and pain than it's worth, especially when you can get this fee waived most of the time.
11-14-2009, 06:08 PM
Ecommerce Merchant Account Guidelines
