Internet Merchant Accounts

Many more Traditional Small Businesses (Brick-and-Mortar) and Entrepreneurs are discovering they need to become multi-channeled, by creating websites to create sales in unique and creative ways, and by not doing so can possibly put them out of business.

So, what does a regular retail small business owner need to know about setting up internet merchant accounts on their websites?

It is very important that Owners figure out and decide on their E-commerce payment processing platform before designing their online store because the method that is decided on will usually decide the implementation of their entire website.

Small Business Owners basically have two choices when it comes to Internet Merchant Accounts:

1. Third Party Payment Processors - like PayPal, Google Checkout, 2CheckOut, etc.

2. True Merchant Accounts - through a Bank or a Merchant Account Service Agent

Third Party Payment Processors:

- Do not perform credit checks

- They'll usually accept high risk businesses without higher rates

- Rates are not negotiable

- They can not be used with a separate processing gateway

- The Third Party Processor's name appears on your customer's credit card statement

- You can discontinue the relationship at any time without incurring a penalty

- It can take up to one month to receive any deposited funds

- Discount rates can be as high as 6% and $1 per transaction

- Purchasers have to go to a separate site for payment processing

- Promotes Third Party Processor's business

True Merchant Accounts Processors:

- In applying for a True Merchant Account you'll undergo a full credit check

- A Merchant Account can not be used for personal use

- High risk businesses will pay much higher rates

- Rates are somewhat negotiable

- A Merchant Account can be used with a separate processing gateway

- Your Business Name appears on your customers statements

- You may be locked into a multi year contract

- Funds are usually deposited into your bank account within 1-3 business days

- Discount rates can be lower then Third Party Processors

- Purchasers don't have to go to a separate site for Payment Processing

- Appears more reputable & have ownership of the relationship with your customers right down to purchasing

Both "Third Party Processors" and "True Internet Merchant Account Processors" have their 'pros' and 'cons'. Most Internet Start-ups do not survive beyond two years.

The Small Business Owner should know what type of category they fall into after seeing the above comparisons.

Basically, if you are just dabbling online then a Third Party Processor will suffice for most Entrepreneurs needs, but if you are serious and plan to do a decent business volume online with your online store then you will want to use True Merchant Accounts.

What is involved with setting up Internet Merchant Accounts?

It takes three main parts to make a E-commerce Payment Processing Solution work.

1. Shopping Cart

2. Payment Gateway

3. Merchant Account

The Shopping Cart

The Shopping Cart is the Database that enables your customers to choose what products they would like to purchase on your website. When they are ready to purchase a item they will click on the shopping cart icon, which will lead them to your Secured Gateway Page. Most Web-hosting providers offer and shopping cart feature that can be provided for your website.

WARNING: Before choosing your shopping card service provider, make sure you know who your 'Gateway' and 'Merchant Account' providers will be and that they approve your shopping card service. I have seen many frustrated Small business owners design their sites and make their agreements with a shopping cart service only to later find out that the shopping cart service is not a approved vendor from the 'gateway' provider. Not usually an issue because most 'gateway' services approve many shopping cart service providers, but it is always better to work backwards before implementing into your website.

The Payment Gateway

The Payment Gateway is the component that provides the secure credit card processing. The Gateway will check to make sure the credit card information is correct and processing the order securely. Usually handled by the Merchant Account Provider depending on what Shopping Cart System you are using. Gateway services usually have a monthly fee of $20 - $60 a month depending on the service provider and sometimes a transaction fee too.

The Merchant Account

Merchant Accounts are your own specific account numbers that have been set-up to track and your processed payments for your credit cards, such as, Visa, Master Card, & American Express. Rates can vary on E-commerce Merchant Accounts from as low to below to 2% to as high as 5%. Discount Rates are Traditionally higher due to the fact that cards are not present for the transaction and it creates a higher risk for credit card fraud.

What You Must Have On Your Website Before A Payment Processor Will Accept Your Internet Merchant Account Application?

1. Privacy Policy

2. Terms of Use

3. Refund Policy (you don't have to provide refunds, you must state what your policies are.)

4. Shipping Policy and costs

Then if you have a shopping cart service then chances are better then not (as long as your personal credit is good) that you should be accepted to receive internet merchant accounts for your web business.

Internet Merchant Account Rates

Again, just like retail merchant accounts the lower your average ticket price and the higher your monthly sales volume the lower the rate you will qualify for. However, you should always under estimate you volume unless you have prior proof or merchant account statements to back up your volume.