Processing online payments, you don't need a merchant account!

For all of you who don’t know what a merchant account is, it is an account that is created so that a business or individual can accept credit cards, debit cards, gift cards and other forms of electronic payment. This is also widely known as payment processing.To process transactions, a merchant is charged a fee called a discount rate. Now pretty much everyone knows that if you want to sell your product worldwide with any varying degree of success then you need to accept credit cards and be able to process them instantly online. The problem is that a merchant account is not by any means an easy thing to get. The credit card companies are very careful with who they let process payments for them. If you’re credit sucks then don’t even bother applying, you’ll just make your credit worse. If you have too much credit outstanding or not used then that could count against you as well. How? Well just because you haven’t used that $10,000 department store credit line doesn’t mean that you can’t or won’t. Get the picture? Risk, the all consuming monetary term. If the risk is too great in the eyes of the bank then you will get the shaft.

Let’s say that you do get approved and you want to sell your brand new top-of-the-line widgets over the internet. Ok, you have got your site, your product, and now most of all your new merchant account so what next? Well, the next thing you have to do is create a way for the user in Customerville to buy your widget online and give you his credit card information so your bank can process the transaction. Sounds complicated right? Well it is. It requires specialized software to be installed on your webserver as well as any shopping cart software to go with it. Now you are talking about an investment in the thousands of dollars. Plus you alone are responsible for chargebacks, fraudelent purchases, username and password abuse, and any other unpleasant activity. Not to mention that if you are involved in any aspect of the adult entertainment industry then every possible fee and risk assesment that is involved with a merchant account just went up. The online adult industry is notorious for fraud and chargebacks, even though they constitute the majority of the profits for online commerce. So by now you are probably saying to hell with all of it, who needs the problems right? Well, fret not grasshopper, for there is a easier, softer way.

It is called 3rd-party transaction processing. Basically, a 3rd-party processor will charge the customer’s credit card for you, obtain the funds, then either deliver the online service (assuming it is an intangible, like a subscription to a member’s area), or notify you of a product order (which you then deliver to that customer), then they take a percentage of the overall transaction amount (usually about 15% on average) and send the rest to you in a variety of ways (check,credit,wire-transfer,direct-deposit etc.). 15%!!?? Why so much?? Well, when I tell you what they do for that 15% you might even want to give them a raise. Companies like CCBill and Ibill will let you use their merchant account, set up and install the necessary merchant processing software, any shopping cart software you might need as well as full username and password management software (if needed). Best of all is that they assume all the responsibility for fraud and chargebacks. Then on top of all that they even provide full technical support not only for you, but for your customers as well.

The best part of all this is that you do not need a high credit rating, a credit card, collateral or much of anything else besides usually a bank account and a valid mailing address to become a client of theirs. There is no credit check or employment check, your business is your word. As long as everything is on the up and up and you do not conduct business like a total scumbag then you are all set!

I have personally dealt with many of these companies and each and every single time was a pleasure and an excellent business venture to boot. The only initial fees involved I think are a one-time company registration fee to the credit card companies which they will let you pay with the income you generate wih them over a predetermined length of time. The other catch involved (and it is not really a bad thing) is that they usually hold about 5% of your revenue in “Reserve” for extenuating circumstances, like if you decide to shut down your website and you leave 500 paying members totally screwed for that month’s subscription then the 3rd-party processor will use your reserve to give those people refunds. Don’t worry, after about six-months they start paying it back to you in increments, so they never really keep any of that 5% anyway. It is just a security measure for them.

So if this doesn’t light a fire under your rump then maybe Paypal will. Paypal has emerged as one of the premiere transaction processors in the online world. They have millions of customers worldwide and are an extremely reliable company. They have a great executive team over there in the corporate offices, they were all transplanted right from Enron headquarters. No just kidding, they weren’t transplanted, they just walked. Anyway, Paypal acts just like one of the 3rd party processors I mentioned previously, the only difference is that they act more like an actual bank where you open an account with them, they even issue you an ATM/Debit/Credit Card if you so desire. You can access your account online, send and receive money, sell products over the web, sell products on Ebay and Yahoo! Auctions, as well as setting up a custom shopping cart for your website. If you are selling some type of service or subscription then I would recommend going with a 3rd party processor, on the same token if you are selling an actual tangible (you can touch it) product then I would go with Paypal as they are much easier to set-up a shopping cart with for small-medium ranged sites. Also, the processing fees for Paypal are much lower than the traditional 3rd party processor.

I hope you got something out of this, if even to educate yourself a little on the ins and outs of conducting commerce on the web. Caio!