What you
need to get a Merchant Account
Accepting Credit Cards over the Internet requires putting
a number of separate pieces together. Although we do not provide
these types of services we do assist our clients in finding
the correct merchant services for their type of business.
These are the pieces: 
* A bank to issue you a merchant credit card account
* A transaction clearinghouse designated by your bank
* Hardware or software gateway to the clearinghouse
* A merchant credit card broker (optional)
* Internet Gateway
* (Security is vital, but beyond the scope of this article)
Let me describe how each of these pieces plays a part. You
probably know much of this, but bear with me as I explain
each of these pieces in turn.
Bank
A bank or other financial institution is required to set up
a Visa or MasterCard merchant credit card account for you.
Ideally, this is your own bank, where you already have a checking
account. Banks don't let you forget that they are taking a
risk with you. If, for example, you failed to deliver the
product or service paid for with a credit card, they would
be responsible for making it good. Of course, they are getting
paid enough to cover this risk, the processing charges, but
they check you out pretty carefully before issuing you an
account. Assuming that you have decent credit, they will help
you set up an account.
So what do you do if your bank or financial institution won't
set up an account that allows you to take credit card information
over the Internet? You go to a broker.
(or in some cases you may need to work with a reseller or
third party biller.)
Merchant Credit Card Broker
You don't have to look long on Yahoo to find that there are
many, many people who want to help you set up an account --
for a fee. Some of these people are very reputable, some are
shysters. In industry parlance these are called Independent
Sales Organizations (ISOs). Make sure you check them out before
you plunk down your money. Brokers aren't an essential part
of your online transactions, they only set you up with a bank
and then step out of the picture. They make their money in
one or more ways: a finder's fee from a bank (which you might
see in the form of an application fee, a percentage of the
hefty fees you'll pay for a card-swipe machine or PC software,
and perhaps an up-front fee). They will place you with a bank
that is able to take someone with your credit history, and
that is comfortable with Internet transactions.
Transaction Processing Clearinghouse
When you finally get set up with a bank you'll find that they
probably contract out processing the credit card transactions
to a transaction clearinghouse. When you get ready to process
the purchase made on your online (or physical) store, they're
the people at the end of the modem who tell you the credit
card number is valid and doesn't have its credit limit maxed
out. We'll explain more a bit later. You don't usually pay
the transaction clearinghouse directly (though they may deduct
bank fees and make net deposits), but you'll have a lot of
interaction with them. Examples: First Data Corp. and First
USA.
Many transaction processing providers might also be able
to act as your Merchant account Broker and help set you up
with your merchant account.
Hardware/Software Gateway to the
Clearinghouse
The final piece is a gateway that connects you to this transaction
clearinghouse. Nearly gone are the days of paper processing,
nearly everything is electronic now. There are three common
gateways:
- Cardswipe machines. Next to nearly every
cash register in the country reclines one of those gray
flat boxes that the clerk swipes your card through (and
sometimes wipes it off and swipes it through again). Then
she enters the amount of the transaction and waits. Thumbs
twiddle. A few seconds later her terminal lights up with
an authorization code which is printed on your credit card
transaction slip. That authorization comes from the credit
card clearinghouse that the store's bank contracts with,
and it effectively assures payment to the merchant when
the customer signs on the dotted line and the purchase is
made. Examples: VeriFone Tranz, etc. But these machines
aren't too helpful for Internet businesses, where you don't
have the customer's card to swipe; you'd have to get pretty
good with the keypad. Fortunately, there are some other
options.
- Desktop Software. Many businesses don't
ever see the customer's credit card. They get the credit
card number over the phone, via mail, or over the Internet.
Every day or two, the merchant enters the credit card numbers
and transaction amounts in special software, and transmits
that list over a modem to the clearinghouse designated by
the bank. In a short time, the clearinghouse responds with
a list of "good" cards, and a list of "bad"
ones. The merchant then sends a message back to accept the
transactions for good cards, and frets about merchandise
that went out the door with a "bad" card. Of course,
if you're wise you just don't ship until you've run the
credit card transactions. Examples: ICVerify, PCAuthorize,
MacAuthorize. This solution works all right unless you have
a large volume of orders. It also requires you to rekey
data from each order into your computer, which can get time-consuming,
and introduce errors.
- Real-time Website Gateways. Finally,
there are several sources of gateways to the processing
clearinghouse which can check the customer's credit card
while he's still online. In some cases the gateway requires
a special set-up by your Internet Service Provider (CyberCash);
others employ Internet connections to a service bureau gateway.
These various gateways provide a bridge from your website
to a completely different modem channel to check the credit
card in real-time, a rather complex procedure if you were
to try to do this yourself from scratch. However, several
of these gateways are pretty easy to get set up. Beware:
while standard HTML forms can accommodate such a gateway,
not all shopping cart programs can do so. Therefore, if
you wish to use a real-time gateway, make sure all the pieces
fit before you purchase. Examples: Anacom Merchant Services
SecurePay, Online Analysis SocketLinks, CyberCash, VeriFone
vPOS, and others.
Costs
How much does all this cost? That all depends. You can save
a good bit of money by careful shopping. A couple of rules
of thumb: assuming you have decent credit yourself, your bank
can probably give you the best deal. When you go through a
broker, you've just introduced another person who needs to
be compensated, and you might end up paying a higher rate
to a bank that doesn't know you well already. However, a good
reliable broker may just save you a lot of time shopping and
putting some of the pieces together, especially if your own
bank isn't Internet-savvy.
What does it cost to set up? Figure on spending $500 to $1,500
and you'll be in the right ballpark. You'll need to set up
the merchant credit card account yourself, so shop around.
Also, look for a webstore designer or webmaster who can guide
you in choosing a gateway that is compatible with your purchasing
system (e.g., shopping cart). **Click here
to find info about lower priced alternatives.
Visa and MasterCard are least expensive. Sometimes American
Express, Discover, Diners, etc. require a higher transaction
fee. 15 to 30 cents per transaction
Application Fee Bank or broker:
Sometimes this can be pretty high. Sometimes there is no
charge. Shop around. Costs vary from none to $500. **Click
here to find info about lower priced alternatives.
Set-Up Fee:
Bank or broker can cost any where between $30 to $300 **Click
here to find info about lower priced alternatives.
Gateway Hardware or software:
Bank, broker, or gateway Banks and brokers make money reselling
or leasing cardswipe terminals, PC verification software,
or real-time Internet verification systems. You may sometimes
purchase these from the source or third parties. Shop around
cost run between $350 to $995 **Click here
to find info about lower priced alternatives.
Supplies Bank or gateway:
These are sometimes included in the cardswipe terminal
rentals. Free or fee
Internet Gateway set-up Webstore designer or webmaster:
To get real-time credit card authorization on your Web
site, expect to pay your webstore designer to compensate
for the extra time it will take to install the gateway.
Varies
Monthly processing fee Internet gateway:
The gateway company may charge you a flat monthly fee to
process your credit cards, in addition to a per transaction
fee. Cost generally run about $40 per month. **Click
here to find info about lower priced alternatives.
Note 1. The bank generally gets you set up to accept only
Visa and MasterCard. If you want to accept American Express,
Discover, or others, you have to apply separately to each
of those organizations and then coordinate with the processor
to process their charges, too.
** If these prices
are not within your budget there are many other alternative
programs that will allow you to still accept credit card payments
over the internet at substanially lower fees, with or without
your being approved for a merchant account. See
our merchant provider list! and Third
Party Billing/Reseller Information
Call us TOLL FREE for more information
or a free price quote at:
1-866-LIBWEBS
or
contact us at:
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