Typical % cost of e-commerce transactions?

e-commerce fees credit cards

[LTT_guy]

Hi, i'm new to the forum, and hopefully this is a simple, easy question.

We're in the early (pre-launch) planning stages for an internet site that will provide pay-to-play gaming. My background is not in commerce, and I want to make sure we include a realistic estimate for the difference between what people pay us, versus what we have left after we pay our service charges for conducting the online transaction, to our merchant account and any other fees incurred in a typical online transaction.

If we accept payment online via credit card, what are the normal % cost of the transactions? For example, if 10,000 people pay us $100 each via online credit card transaction. That would be $1,000,000 in sales, what pct would be the cost of sales.

A consultant has already given me a number (2.1%) and I just want a sanity check, compared to what "any e-commerce businessperson" would know, is it a realistic pct, or would you laugh and say " you forgot to account for the cost of ____! "

Thanks very much for any input you could provide!

[Essex_boy]

When you say % of cost I imagine you mean the CC processing fee?

2.1% sounds dam good in the UK, I know retail shop owners taking in around $750 thou a year that cant get that rate.

It wasnt mafia mutual card processing Inc offering that rate was it?

[mcguffin]

Hi LTT_guy,

When you're quoted a basic discount rate, be sure to ask if there are any surcharges.

The lowest rate (discount rate) is usually only applied to transactions where the merchant physically swipes the card through an electronic reader. That presents the lowest chance of error and fraud.

There's usually a surcharge (called the mid-rate) if the merchant hand keys a card into the terminal, but the customer and card are both actually present.

Finally, there's often a surcharge if you collect the credit card information without the card holder actually present (say by internet or phone). Remote orders present the highest risk of chargebacks to the credit card companies, since neither the card holder nor the card are present at the point of sale. The non-qualified surcharge can be pretty significant, often adding a full percentage point to transactions.

If the purchaser uses a corporate credit card (instead of a personal card), there may be a higher rate as well.

It also depends on what credit cards you plan to accept.

Visa and MC tend to have mid-qualified and non-qualified rates, while AMEX often charges a flat rate on all transactions.

Disclaimer: Actual mileage may vary. Professional driver on closed track. Do not attempt this at home. Warning, the product you are about to enjoy may be hot. Rates may change at any time. Wear your seatbelt.

[LTT_guy]

Thanks for the replies, I think the number I was quoted might have been for a "brick and mortar" operation and didn't take into account the fact that it would be an internet transaction.

I was trying to research this on my own and it seems there are typically also "per transaction" charges as well, from the Internet merchant Account and/or the gateway for the transaction? 0.20 to 0.50 per transaction? Can anyone comment on this or clarify?

[mcguffin]

LTT_guy,

Many companies will also charge an "inquiry fee" per transaction, and the range that you quote is about right. It all depends on the type of card, the gateway you use, and the volume of business you provide.

[PCInk]

You may also find that there could be two sets of fees. One for an internet merchant account (with the swipe machine - if you need to rent one), and a separate set of fees for an internet gateway (someone to handle the transaction in the internet - unless you want to type all the card numbers in yourself?).

2.1% sounds very high to me for a normal merchant account, but cheap for an ecommerce merchant account (everyting included).