Am I spending WAY too much on CC gateways / processors?

How much is too much?

[chipdouglas]

Background
After a year in development I finally launched my site. It's content-driven and revenues (will) come from advertising revenue. Based on my research I expect the right content will attract unique visitors in the low- to mid-hundreds of thousands (e.g., 400,000) per month within 2 years. Since I am selling full spots of limited space by the month, sales will be expensive ($1000-$6000) but very low volume (5-10 transactions/month).

Having done very little research (just went with what my developer recommended), I made the mistake of setting up a credit card processor and gateway right at the beginning, so after a year I have had 0 transactions but I'm out over $700. I use CTS Holdings and Authorize.NET to process/gateway for Visa, Discover and Mastercard, and Big Sky for Amex.

CTS Holdings
CTS is in my view a dirty company with complaints ALL OVER the Internet, and they have randomly higher charges at unexplained intervals. Monthly it's $18--used to be $12--but it'll randomly be $80 or $30 some months with some "fine print" explanation if you call in to inquire. Additionally, there is a HUGE early termination fee if you want to bail before 12 or 18 months or something, such that it would be more expensive to bail. I'm the fool for not reading the fine print, but in any case CTS alone is now costing me $200-$300 each year with 0 transactions; don't know about their % cut of sales.

Authorize.NET
These guys have $18/mo minimums with no surprises. No complaints about them, really, but they are still costing me ~$216/year for 0 transactions. Also don't know about % of sales.

Big Sky
I've heard good things about them but it's still $155.40/year minimum even with 0 transactions. Again, don't know %'s.

Should I Switch?
This adds up to nearly $700/year with no activity, obviously more with %'s. The question is, do I really need to spend $700+ a year on CC facilitators to attract reputable advertisers? Can I just use Paypal or is that unprofessional? Do they take an excessive cut of sales? Will it scare away advertisers? Based on the metrics I have provided what seems to be the best route?

[incrediBILL]

but it'll randomly be $80 or $30 some months with some "fine print" explanation if you call in to inquire.

Did you make your site CSI compliant?

If not, they may be charging you an extra insurance fee for not being compliant.

Not sure why you signed up for all those gateways so early in advance and paying all those fees, as Paypal is perfectly acceptable for many and it also has a silent payment option just like Authorize.net, so people would never know.

The real issue here is you aren't selling your ad space, because if you were these annual fees wouldn't mean anything as you would be rolling in dough.

Consider cutting your rates and opening up more spaces to let some smaller advertisers play because I prefer having hundreds of small advertisers on my site vs. a couple of big advertisers that are always bitchy and want more and more stuff.

[mhansen]

Have to reiterate the previous comment.

We used a Paypal virtual terminal for all credit card transactions at 2.8% + $20/month for a long time. It wasn't the best solution, but definitely cheaper than any start up costs before we knew if automation was needed or not.

As much as some people hate Paypal, it really does have great buyer protections. Most people who hate them are people like us, who get funds frozen for 1 week to 90 days when high amounts of fraud occur.

MH

[chipdouglas]

Thanks a lot for the feedback, guys.

To clarify, incrediBILL: (1) I took the developer's advice by starting processing immediately and the project took a LOT longer than expected, so I found myself out a substantial sum. That's a beginner's mistake I can now learn from. (2) Also, I am not yet concerned about no interest from advertisers as I just launched, and I plan to start rates very low and build out service and prices as demand permits.

To both of you, though, it sounds like PayPal is acceptable? After a year or two I expect to be dealing with quite large companies who buy a lot of space all over the Internet--think they'll cooperate with Paypal? I guess for all my bloviating above that's the only question I would like confirmed if possible.

[Demaestro]

I use Moneris and I have found their fees very reasonable. I don't have the exact numbers on hand.

I have sent a couple clients to them to set up accounts and have even helped in the application process and I found that Moneris charges different rates based on the 'risk' levels and the nature of the business.

Sometimes they want a guaranteed letter of credit, sometimes they want more than 5% sometimes less.

Travel agents seem to be assigned high rates where people shipping physical goods get lower ones.

Perhaps you should inquire into if the nature of your business/industry contributes to your rate. If it is maybe there is something you can do to ease their anxiety about your business. Moneris often drops rates after 2 years because they trust the business more if chargebacks aren't happening.

[incrediBILL]

After a year or two I expect to be dealing with quite large companies who buy a lot of space all over the Internet

Large companies use Paypal or Credit cards?

They often expect to pay for performance(PPC/PPA), or pay at the end of a campaign, send company checks and all sorts of other nonsense.

A lot of this happens because you often end up dealing with media companies who won't pay you until they get paid.

Then, adding insult to injury, the media company will put 3rd party monitoring systems between the actual customer site and your site, which may or may not count all of the hits properly. Expect to always give them 10% more than they ask for since not all visitors will be able to actually get to either the media company or end customer server due to random routing issues and you definitely want to get paid.

Don't forget geo-targeting, US/UK/CA only impressions, and much more.

Those reasons are why I booted all my large advertisers years ago and will never look back.

Not to mention charging very large amounts on CC's will often invoke the banks anti-fraud which stops the transaction. You're also assuming that the person placing the ads even has a CC capable of processing such a large balance in the first place, which means they'll need the CC from their CEO or something.

Finally, you have the very real risk with large amounts on CC's to have one massive chargeback if they didn't like the ads performance and/or your CC processor withholding funds (thousands) to cover potential fraud/chargebacks when you charge very large fees.

Sure, getting $30K checks are nice, especially since a $30K CC charge rarely clears, but 30K headaches dealing with it all aren't fun.

The small-to-medium sized clients will be fine with regular CCs and Paypal.

[chipdouglas]

Got it--thanks guys!