[c.servicesales]

One of the most critical decisions for launching an online business is deciding on which credit card processor to use and how you will choose to process your customer’s payments. There are two primary methods to choose from: You can use a true merchant account and do it yourself or you can use what is known as a third-party processor. Today I’m going to cover the considerations in choosing a true merchant processor.

Probably the best way to choose a credit card processor is by simply listing your needs and then comparing the various available plans. Will cost be the most important element and what other factors will be involved?

True Merchant Credit Card Processors
With a true merchant account, you are the merchant and you have the option of applying directly through a bank. However, this is often done through a sales agent. The account will be dedicated to your business only. You, as the merchant will have total control over the account and be totally responsible for it in everyway. You will have to provide a gateway for the account because this will not be included in the account.
Note: Some companies that offer credit card processor plans will extend a bundle that includes a gateway as an enticement. You are free to choose any gateway you prefer since they are totally separate entities.

Basically, your merchant account for a credit card processor is a direct account with MasterCard, Discover Card and American Express. If you resolve to accept payments from their members, you must abide strictly by their rules.

Most reputable online merchants understand they will be accepting credit cards online and that they will need a merchant account and a payment gateway. There are good reasons for assuming this:
- If there are large volumes of transactions to be processed, the discount rate will be far superior with a true merchant account than with a third-party credit processing company.
- The merchant will have 100% control over the account. The merchant can deal directly with customers and it’s the merchant’s name that appears on the customer’s credit card statement.
- Transparent checkout feature - Allows the customer transaction to be processed directly on the Merchant’s Website, rather than being redirected to a third party site.
- Portrays a more professional image - A true merchant account is a more seamless process which is expected from customers.

When you apply for a true merchant account, you will have to go through a full credit check and you may not use the account in anyway for your own personal use. The rates are always negotiable but high-risk products will garner much higher rates. You may use a separate gateway of your choice for credit card processing and your business name will always appear on the customer’s statement. Funds will be deposited within 1-3 days and you may be locked into a contract for several years.

Most online businesses that are just starting out have small margins and tight budgets. Cost will be the single most important factor in choosing a credit card processing company for most of them. The needs of each business will vary, as will the offers they receive for credit card processing. In making a comparison, it’s almost like comparing apples and oranges and can be quite difficult. One way to approach the comparison process is to collect the data on fees associated with both third party and a true merchant account first.
- Setup fee: how much you need to pay to establish the account
- Discount rate: the percentage of sales that the processor takes
- Transaction fee: the flat fee the processor charges for each transaction
- Monthly fee: the monthly fee associated with keeping the account active
- Setup fee: the cost to set up a gateway
- Gateway monthly fee: the monthly fee charged by the gateway provider for use of their payment gateway services

Next, list the number of transactions you will make each month and how much the average customer will spend on your Website. There is a multitude of third-party processors and true merchant providers for credit card processing that may be compared. For example, Papal and Verisign are two well known companies, but are completely different.

Conclusion
You may ultimately use both of these methods to use credit card processing online but the way in which they are implemented are very different. Each has its own particular advantages. Since every business is different, you must consider all of the factors involved with accepting credit cards online, not just the costs. Sometimes, paying a few additional costs in fees can enhance your customers experience and the overall appearance of your Website. Take ample time to explore all of your options in order to find the best cost-effective credit card processing company that fills the needs of your online business.

About The Author:
First Data Independent Sales is an established leader in the merchant account and transaction processing industry. Founded in 1988, we have maintained an outstanding track record of bringing groundbreaking products, services and technology to market.

[dfveteran]

Great post. Good information. I use paymentech. They have okay fee prices per transaction and so forth. I have used them for 2 years. I stay with them because there have been no problems. If I ever have a problem they fix it.

http://www.paymentech.com/

[jayk]

lengthy but good. i think companies like paypal play an important role for internet entrepreneurs. its really hard to get a bank to approve you to accept credit card payments..

[Corey Bryant]

Lengthy for sure.. I would bet this is daisygrl. I came across a number of her posts, actually one on this site even. Unfortunately it seems that agent office decided to buy forum posts. Doing a google search, you will see she registered on a number of forums around July 15-22, posting a link to some type of website, usually the one mentioned in the signature.

Paymentech is a large transaction processor as well. First Data actually owns part of them. The other large processor is Nova in the United States. The gateways (LinkPoint, Payflow, Authorize.net/Cybersource) communicate with them. First Data actually can authorize / decline the transaction is they have a relationship with both the issuing / acquiring bank without sending it over to VisaNet, MasterCard, etc.

Usually getting a US merchant account is pretty easy, if you are wanting less than $30,000 a month. Anything more, and you need bank statements to back it up in case something happens.