Accepting payments online without a merchant accountCopyright ? 2005

Do you really need a merchant account?

Deciding when to get your own merchant account for internet sales can be a confusing and expensive venture. If you have a small to medium sized business and only sell a small amount of products then having your own merchant account may not be the answer for you.

Middle Persons And Binding Contracts.

You might not know it, but, in the initial stage of setting up a merchant service, your direct contact is a middle person or a sales agent working for an ISO (Independent Sales Office). In most cases sales agents work on a full commission basis and their commissions are either a straight fee based on a lease amount they lock you in, or a percentage of sales that you generate or in some cases, both.

Even though equipment lease is a non-issue for e-commerce since transactions are processed in real-time by a gateway company, most merchants find themselves in a binding lease for a minimum of 3 to 5 years.

Expensive Fees And Minimum Commitment.

Once you are approved by the merchant bank (after a business and personal credit check), you are required to maintain a minimum amount of sales per month (or pay a minimum fee) and in a most cases, limited to making a certain amount in monthly sales (limited to maximum amount of sales permitted by the merchant bank).

Some of the costs involved.

Setup fee - Anywhere between $40 - $200 Monthly fees -Anywhere between $25-$50 for statements and minimum fees. Per transaction and charges fees - Usually between 2%-7 % in fees and .30-$1 per transaction. Gateway fees - $10-$30 per month (most gateway companies are charging a per transaction basis now) SSL certificate - Can be as much as $250 Shopping cart fee or software purchase - Monthly can range $20-$70 and software purchase can be as much as $1400. 

In addition to the cost is the technical aspect of setting up your site to use a shopping cart and real-time processing. Not all gateways, merchant accounts and shopping carts play well together. You must make sure that each can work with each other.

Fast And Easy Way To Accept Payments Online.

Now, if you are a larger business or do a lot of sales each month perhaps your own merchant account is the answer for you. It can save you money in the long run. But if you are just starting out with an online business, then a third party payment service may be the answer for you.

Third party companies handle all the background details, pay the monthly fees, assume the risks of fraud and charge backs, and handle all the secure shopping your customers will expect when shopping online.

There usually isn't a set up charge, gateway fees, SSL charges and shopping cart set up. Depending on the service you choose, they can give you simple HTML code to add to your site or allow you to use "buy buttons" or both. Fees range anywhere from 5.5% to 13.5%. Some companies charge a set up fee and a per transaction fee.

Then there is always Paypal. A useful service for new comers to the online payment arena but it has its drawbacks. With Paypal:

Your customer must set up an account with them They can FREEZE your account  They can set limits on monthly transactions Online Payment Solutions:

Clickbank Paypal 2Checkout

I suggest you explore all your options and decide what is best for you financially and technically. A little research online can save you money and time in the long run

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ABOUT THE AUTHOR

Abe Cherian is the founder of Multiple Stream Media,
http://www.multiplestreammktg.com . If you wish to
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