Are you planning on selling “things” online? Maybe you have already used payment services like PayPal to do this. But lets get real! Paypal is good for the small stuff, but it has its problems:
1) High fees
2) Buyers must have Paypal accounts
3) Strict processing rules
4) Lack of professional appeal on your website
Get your own merchant account!
Getting a merchant account for your website is much like getting a new bank account. You fill out some forms, you choose a few options and you get approved. Sure, this may take a few weeks to finalize, but the process is rather simple and almost any customer service rep will happily walk you through the steps.
But beware!
Or at least, AWARE!
Getting your account is one thing, but UNDERSTANDING your account is another. First, understand that the business of merchanting involves a bank accepting a transaction payment for you and then funnelling this payment back into your account. It seems simple and safe, but remember this can go the other way, too.
Refunds and even worse, chargebacks, result in money coming from you, back to the bank and into the customers hands.
Now refunds are still relatively safe because YOU process them. It is your discretion to process a refund and (hopefully) you have the funds available in your account to do so.
Chargebacks are the real problem. These are payments that are given back from the merchant to the customer. These customers go straight to the credit card companies and complain that a charge is false, fraudulent, unknown, etc. These chargebacks risk resides because the credit card companies will “take” this money from your merchant (and hopefully you have the funds to pay back your merchant).
Because of this, merchants have to be very wary of their partnership with you. They will likely impose a monthly processing limit. They may even impose a “reserve”, where they will hold a percentage of your sales earnings as collateral. These are things you need to know!
Of course, as you prove yourself to your merchant, these limits can easily rise while the reserves should ultimately go to zero. But breaking these rules (as well as having a large number of chargeback customers) can result in immediate deactivation of your merchant account (DISASTER!).
And yes, you’ll get chargebacks time-to-time. Depending on how you set up your account, you may challenge these chargebacks if they are legitimate.
But at the end, your merchant should be your friend. Know them. Communicate with them. And understand their business (as well as your account!). A merchant account can really help your business grow, but neglecting the fine print can result in online business ruin.
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SUGGESTED MERCHANT ACCOUNT SERVICES:
Powerpay - They are perhaps one of the most well-known and respected credit card processing companies in the business. Many of the “internet gurus” use Powerpay exclusively. They seem to be quite flexible with adapting to your sales volume while providing competative rates in the business. I personally have not used them, but many of my internet friends swear by them. Learn More about Powerpay…
e-OnlineData - I found these guys through my hosting company for NetWebVideo (Pair Networks) and for the year that I have used them, I have had no issues at all. They are associated with Authorize.net (perhaps the most known gateway system out there) and they have always been very good about answering my questions and providing other customer service requests. Again, very low rates. Learn More about e-OnlineData…
What do you think about Payoneer?
Ever used their prepaid debit card?
November 6th, 2008 at 10:54 am
Matthew,
Great post! You covered a ton great points that so many business owners are not aware of. I know because I have been a merchant account broker in Canada for several years and watch business owners shocked at their merchant account bills.
You listed some great resources for your US readers, but for your Canadian readers they might like this post:
18 Essential Questions Every Canadian Small Business Owner Must Ask Before Choosing a Payment Processing Provider
Thanks for this great post and video! In fact, I am going to add your video to my blog because it is so good!
November 6th, 2008 at 4:48 pm
[...] Matthew Bredel talks about Merchant Accounts. He is not in the industry and is talking about US merchant accounts, but a lot of what he speaks about also pertains to the “Canadian Merchant Account” Industry too. [...]
November 6th, 2008 at 5:03 pm
This is one of the best which i have never seen.The are the most well know merchants. As the best of Matthew bredel…..
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Hillary
Social Bookmarking
November 6th, 2008 at 10:16 pm
[...] As Matt talked about the other day, find out what your trading limits and reserves are when setting up a merchant account. Different companies have varying policies and the answer could be a deal closer for you based on [...]
November 8th, 2008 at 9:27 am
Charge backs can be a problem when processing with a internet merchant account but there are things you can do reduce them to a minimum.
1. Have a clear shipping policy. Let your customer know how soon your product will be shipped and shipping options.
2. Post your refund policy on site.
3. Use address verification (AVS)
4. Use a well known online payment gateway like Authorize Net with your internet merchant account.
Michael L. Rupkalvis
The Transaction Group
November 24th, 2008 at 1:45 pm
[...] Internet Merchant Account (But Beware) [...]
December 6th, 2008 at 7:28 am
Great information. I can’t remember how I found your video, but had watched it a few weeks ago. These companies purposely try to confuse people. It’s a nutty industry that’s lacking in transparency and service, at least up here in Canada.
December 11th, 2008 at 12:19 am
[...] Paypal vs. an Internet Merchant Account : the advantages of having an internet merchant account, instead of a third party processor such as [...]
December 14th, 2008 at 8:23 am
Through this video, Matt has provided tremendous benefit to those in the audience who plan to open a merchant account. Any business owner who needs to obtain credit card processing capability should research all applicable rates (gaining familiarity with the terminology used in the merchant account field). By knowing the relevant fees, merchants are less likely to be hit with “hidden fees” and can more easily compare quotes between merchant account providers.
Look for vendors that waive as many fees as possible (e.g., monthly minimum, batch, etc.), and in particular, do not assess startup and/or termination fees.
Best Regards,
Andy Lax
IntelliCollect
December 19th, 2008 at 10:08 pm
anyone have some real experience on options?
March 2nd, 2009 at 6:16 pm