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What to do if you Do Not have a Merchant Account
-- And yes -- there is a solution!

If you can't meet your bank's requirements for an Internet Merchant Account, there is another way that you can accept credit card transactions online. Although we do not provide these types of services our selves, we do assist our clients in finding the correct merchant services for their special needs.

We have found ways to assist many of our clients who do not currently have a merchant account. Resellers can handle the transactions on your behalf, then issue you payment for sales according to a prearranged schedule. You do not need a secure line, since the actual transaction occurs on their site, not on yours.

The third-party processor takes care of the entire purchasing process. This includes shopping cart, credit card authorization, customer service and billing inquiries. When customers are ready to buy, they click on a link on your site and are taken to a secure order form on the third-party server.

This is where they place their order and have it confirmed. You are notified, usually by e-mail, that a transaction has been processed. Your only responsibility is to ship the order. Some processors handle returns.

Because they manage all aspects of transaction processing, third-party processors allow small-business owners to save money on administration and customer service. You don't need to manually verify transactions or respond to billing questions.

This makes third-party processing services perfect for small businesses just getting started that lack established credit and generate less than $1,000 per month (U.S.) in sales. These services are also popular with older businesses that have poor credit, with non-U.S. businesses and with businesses selling content and services.

Moreover, most processors provide sophisticated online interfaces whereby you can review transaction information any time of day.

Another benefit of third-party processors is that most have effective fraud-screening systems. They handle all aspects of security and encryption, and most don't require that merchants pay a fee for chargebacks.

As with most business decisions, it's best to shop around to find the right processor for your online store. The services are diverse, and they differ in fees charged and services rendered. For example, some third-party processors offer the ability to accept other forms of payment, can be used for auction sales, or allow recurring billing. Others don't.

Some require sale of tangible products only; others require that merchants sell only intangible goods — services and content.

It is easier to arrange reseller services than it is to get a merchant account through the bank. Before you sign on the dotted line, consider the following:

  1. What's their track record for transferring sale funds to their merchants?
    Do they transfer every couple of weeks or might you wait for months to be paid?
  2. Do they collect any local taxes that may apply to sales?
    If they don't, you are the one who will have to deal with the Taxation Department.
  3. Do they provide timely and accurate sales reports?
    Without proper reports, you won't have the income tax information that you require come tax day.
  4. Are they using the sophisticated technology that can intercept credit card fraud before it happens?
  5. Do they respond promptly to email or phone messages?
  6. What are the terms for canceling the contract? Are you locked in for an extended period? Is there a hefty penalty for cancellation?

So how do you find a service with a good track record? I'd be leery of the "Accept Credit Card" spams that fill your mailbox. In my view, the best way to find a good reseller is to subscribe to one of the mailing lists used by Internet Merchants, then ask list members what services they are using and what their experience has been. Be cautious of effusive testimonials. At least some of the glowing testimonials that you encounter are written by marketing professionals and given to associate resellers to distribute as their own opinions.

Most resellers charge an array of fees for their service. Since the reseller is essentially taking a risk on your behalf, expect higher transaction fees than a bank will charge for a Merchant Account. Shop around and compare rates, but realize that cheaper is not always better. A low-priced service may not be building the necessary financial reserves and therefore may not have long-term stability. Remember, if they go broke, you lose your startup fee and any other monies tied up in their service.

Here are the fees that you might reasonably expect to be charged:

  1. A set up fee.
  2. A monthly transaction fee
  3. Transaction fees per sale
  4. Credit card discount fees (a percentage of total sale)
  5. Holdbacks. As a safeguard against chargeback losses, many resellers will hold back a percentage of each month's transactions for a period of several months.)
  6. Chargeback fees. (Can range as high as $50 or more per chargeback)
  7. Fees for refunds requested by the merchant.

One final thought on reseller services. Almost all of the services you encounter on the Net are available only to residents of the US. Residents of other countries may have to look hard to locate a service that is available to them.

What happens if your reseller goes broke or shuts down?
In most cases, you will lose the money you invested in their service, as well as any sales fees that are owing to you.

By June Campbell

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