"Do I Need to Accept
Credit Cards On Line?" Actually, you should have
answered this question sometime before you began
to read this article. For the majority of people
doing business or planning to do business on line,
the answer is a resounding YES.
|| However, if you are
still in doubt, here are a few guidelines
for you to consider. You may want to accept
credit cards on line if:
The total price of an individual transaction
is likely to be within the credit limit of
most credit cards.
Credit card limits are typically between $250
and $1,500. Sales of large ticket items such
as cars, boats or real estate probably will
not benefit as much from on line credit card
You are not equipped for handling customer accounts,
or you want to eliminate Accounts Receivable from
your business model.
You want to take advantage of impulse buying.
More and more companies are turning to the credit
card to handle their on account customers. The fees
involved are often far less of a burden than covering
thousands of dollars in customer debt. Not to mention
the effort required to process, track and collect
on these debts.
Many businesses, from retail stores to fast food outlets,
have found that accepting credit and debit cards has
increased their total sales.
You want the speed and flexibility to compete in
the on line market.
Speed is the key. People shop on line partly because
they want the product now. If it's ordered today,
they want it to arrive, or at least be well on it's
way, by tomorrow. An on line site that requires
days for a check to clear or credit to be established
will not get a lot of return visitors.
So, you have determined that your on line business
effort will benefit from on line credit card processing,
The traditional route is to go to the bank and establish
a merchant account. This is a formal arrangement
between your company and a bank or other financial
institution that will allow you to process credit
The process to get the account will vary among
providers, as will the services provided. You should
evaluate the merchant account provider based on
Application and Approval:
Just like any business relationship, you must prove
to the institution providing this account that you
are a legitimate and viable business. The requirements
will vary but often include the following:
Valid checking account.
Up to date articles of incorporation.
Business credit check.
Businesses are springing up on the Internet daily
that advertise merchant accounts in one day with little
no application requirements.
Many of these offers are legitimate, but you should
be careful. The 'Tough' institutions with the credit
checks and application process usually are doing
this for a reason. They want to weed out potentially
bad business partners.
It is much like with insurance companies. The healthy
help pay for the victims disease and accidents.
The cost of a merchant account relationship that
goes sour will ultimately be borne by the remaining
successful companies in the merchant account provider's
Which credit cards you can process:
Just because you have a merchant account does not
mean that it is set up for all cards. This goes double
for international orders. If your business is based
in the US, but much of your market is based in Europe,
you may need a merchant account that can process the
European regional cards like JCB.
Fees and charges:
Basically, there are three types of fees for an on
line merchant account:
This is a percentage of each sale that the bank will
deduct from you transaction before completing the
deposit. The range for this fee is usually from 2.5%
Higher rates may apply to business that do not meet
certain qualifications. These can include things like
providing Address Verification as part of your electronic
checkout process. Also, different credit cards may
have a higher discount rate due to processing issues.
A fee for each transaction, usually less than $0.50.
These are special processing fees and will be charged
regardless of your credit card processing volume.
Why would I want my own merchant account?
While is it true that there are many third part merchant
account providers that will handle the entire payment
process for you, there are advantages to your own
When you use third party processing, your customer
is usually whisked off to another web site for processing.
In many cases, you will be required to set up your
'virtual store' entirely on provider's site with their
By handling the transaction yourself, you are in control
of the look and feel from start to finish. The customer
never leaves your site.
Also, when you use a third party provider, they often
make sure that your customer knows about it. Your
customer may not be impressed by being sent to PayPal
to complete the sale. This is especially true of business
to business transactions.
While many third party merchant account vendors advertise
low fees, the truth is that they are just another
mouth to feed in the transaction chain. They have
to get their profit from your transaction on top of
what they pay their own merchant account provider.
Depending on your financial status and sales volume,
eliminating the intermediary company can allow you
to maximize margin on each sale.
So, Where do I go to get a merchant account:
Many banks and other financial institutions will provide
you with the needed account. There are advantages
to getting a merchant account through the same bank
that handles your other types of financial transactions.
If you have a good relationship with the bank and
you like their service, consider them as your provider.
You may also be eligible for fee discounts and special
promotions based on the other business you do with
Many specialized companies are springing up to
handle the surge in on line credit card processing.
Too many to catalog in this article. They are easy
to find, but check them out beforehand.
Make sure that your choice of merchant account provider
can handle the range of credit cards you want to
accept on line.
Look for articles and forums on the web that may
indicate good or bad experiences with a particular
Check out reliable consumer magazines or web sites
that give unbiased reviews of service and costs.
Check with your local business bureau.
Ask your fellows in the business community. This
is where networking, in the human sense, can really
work for you.
Check with your software provider. They will often
have a relationship with a provider that will simplify
Intuit, the makers of the popular Quick Books financial
package, are themselves a provider of merchant accounts.
How to I integrate this with my Web Page:
This will be a matter for your web developers, whether
an outside firm, your IT Department, or you in your
There are many tools available to help in this
area. The most common tool is know as the Shopping
This is an application or a routine that allows
your customers to fill a virtual 'shopping cart'
while moving through your web site.
At the end of the visit, the customer 'checks out'.
The shopping cart software will:
Total the bill, including shipping, handling, and
Accept the credit card information.
Verify the card electronically. (This often requires
a separate service.)
Confirm or deny the sale.
Report the required information to your software
for processing and storage.
So these are the advantages
What are the downsides?
We have discussed this at length above. You will
almost certainly have a larger commitment to software
selection and development than if you go with a
third party merchant account vendor.
Since you will be handling most of the data processing
on your web site, you will also need to capture and
store more of the data. This includes:
Customer Information, including Name & Address.
Credit Card Information, including Card Type, Number,
and Confirmation Number.
Sales tax information.
This must be maintained in a data base. The exact
content and length of time it must be retained will
vary depending on your location and the type of transactions
Credit Card Fraud:
Although you will be using a card validation service,
the opportunity for credit card fraud still exists.
And since you are processing the data yourself, a
larger portion of the liability for this fraud rests
on your shoulders.
To lessen the risk, or at least the liability, you
Make sure that your software can support AVS or Address
This will use a mailing address supplied by the customer
to match against the address of record for the card
This helps insure that the person with the card number
actually owns the card. Due to the increased risk
of fraud, many card companies will charge extra to
process transactions without this information.
Take advantage of the CVCC or CVV2 number on the
back of the card:
This is usually a 4 digit number, similar to the
PIN number used at an ATM. It helps make sure that
the person using the card number is in possession
of the card itself.
Use secured data transfer technologies:
When setting up your web site, make sure that any
sensitive information is sent encrypted or through
a secured Internet channel. This includes both information
sent between the customer and your site, as well as
between your site and the Credit Card Verification
Setting up your own merchant account is a big step,
but it can be the right step if you take the proper
precautions and do your homework. Having your own
merchant account and handling your own transactions
can allow you to:
Maintain control over image and customer service.
Allow you to position your business as a solid member
of the vendor community.