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:
- 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?
- 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.
- 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.
- Are
they using the sophisticated
technology that can intercept credit
card fraud before it happens?
- Do
they respond promptly to email or
phone messages?
- 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:
- A
set up fee.
- A
monthly transaction fee
- Transaction
fees per sale
- Credit
card discount fees (a percentage of
total sale)
- 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.)
- Chargeback
fees. (Can range as high as $50 or
more per chargeback)
- 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.
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