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Accepting credit cards -- a reference guide

Don't get burned...



2:49 am on Jun 7, 2003 (gmt 0)

10+ Year Member

There are very many posts here about those new to accepting credit cards looking for advice. This is an area where those without previous experience can get severely taken. I would say that this is one of the areas in storefront and online commerce where you must be the most careful. Some things to consider:

1. Most all merchant accounts and processing systems (they are usually supplied by two different companies in the "package" you are offered) are sold by third party sales agents rather than the provider themselves. These agents have few conditions set on them by the provider and their goal is to get the most money out of you as possible.

2. With these agents, you can negotiate lease term, discount rate, monthly statement fee, gateway fee, customer service fee, application fee, setup fee, per transaction charge, and minimum monthly charges for all types of fees.

3. The agents use all of the fees to bargain like a used car salesman, i.e. discount rate is reasonable but has a very high monthly minimum or setup charge.

4. Be particularly wary of lease terms. Don't agree to anything over 6 months under any circumstance. Don't listen to anything about three years being a standard in the industry or that there are ways to "get out early." If you break a lease expect to see an entry on your credit report; don't get in the long lease in the first place. A four-year lease broken can result in a collection account on your credit report for thousands of $. However, a little known industry fact is that some of the better merchant account providers allow you to "go on vacation" where you won't be accepting orders or getting monthly charges. This period counts toward your lease term.

5. Credit card processing systems can be broken up into many categories. Two of them are traditional merchant accounts vs. brokered services. Traditional systems offer you your own merchant account with a discount rate of maybe 1.6% for "card present" (storefront) sales and 2.5% for "mail order, phone order" (ecommerce) sales. Daily orders are "batched" and transmitted to your checking account in 2-3 days. Over the last few years new, brokered systems such as ccbill, ibill, paypal, and others have offered systems for accepting credit cards. You do not have your own merchant account. Often, funds are transmitted only twice per month. They typically have very high discount rates. The shopper must leave your web site to complete the transaction (an ecommerce NO-NO). Also, many of these 3rd party systems force your customer to sign up with them. Stay away from these services.

6. Shop around, shop around, and then shop around some more. Compare all of the different types of fees, lease terms, and monthly minimums you are offered. A very good question to ask is to find out what the exact monthly minimum charge would be assuming you did not process a single order during the month. Of those that are among the lowest monthly, consider the ones with the lowest discount rate and then look at per-transaction cost.

7. About one in ten offers you will receive will make good business sense for you. Shop around some more.


3:10 am on Jun 7, 2003 (gmt 0)

10+ Year Member

Thanks for your excellent post!
I only have affiliate & info sites @ the moment but will definately consider these points if I go the e-commerce route.


3:22 am on Jun 7, 2003 (gmt 0)

10+ Year Member

Thanks 1milehgh80210,
I was lucky to have worked in management at a web hosting company and put together a couple of ecom hosting packages where I had to do a lot of research. And I also talked to countless customers that were stuck with paying $80 U.S. per month for years for CC processing because of poor decisions and getting taken.


3:58 am on Jun 7, 2003 (gmt 0)

10+ Year Member

Good post, thanks. Advice on avoiding chargebacks and stolen cards would be helpful as well.


4:09 am on Jun 7, 2003 (gmt 0)

10+ Year Member

I wrote this because I didn't think it was well covered on WW. Subjects similar to avoiding chargebacks and credit card fraud are very well covered in this forum and in the SE's and I didn't comment on them. Just do a search here and on search engines for "avoiding chargebacks" and "fraudulent credit card countries."

Only the complacent webmaster who hasn't done research will get burned by fraud these days (until they come up with new methods to steal from us).

Take a look at [webmasterworld.com...]

Although I am really hoping that additions to this thread revolve around tips for choosing an honest CC processor.



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