Merchant accounts for mainstream adult, gaming, pharmacy, aggregator, Schools
How To Select The Right Online Merchant Account
Starting from scratch, in order to select the best online merchant account for your needs, you need to get the grips with the basics.
Questions such as "What is a third party merchant account?", "What is a chargeback?" and "How do I work the most cost effective online merchant account for my website?" can be difficult to answer at first.
The purpose of this area of the site is therefore to introduce you to the basic details you should understand when looking for a suitable online merchant account.
Merchant Accounts - The Beginners Guide
Done right, the process of accepting credit cards requires virtually no technical knowledge at all, and only a very modest outlay of capital.
Firstly you create the individual pages of your site which list the products you have for sale. Then you create a thankyou page for your order page(s) to be shown after a successful purchase.
For "real world" products this would simply thank the customer for their order, inform them of when their order will be shipped, and provide contact details incase of a query.
For a digital product - one that can simply be downloaded over the Internet rather than being physically shipped - you can provide download instructions for the product too.
Then you sign up with one of the multitude of specialist online credit card processing companies. There are literally hundreds to choose from - and there's almost certain to be one that will fit your business perfectly.
Behind a password-protected area, in your own private section of the site provided by the credit card processing company when you chose them, you can then set up the descriptions and prices of your products, as simply as typing in values. Literally product 1 is called "X" and costs "Y". Job done.
Finally once you've typed these details in your password-protected site will generate an order form for you automatically and give you the address of it. That's right - no need to make your own - it's done for you.
Simply paste this website address into your webpages where you'd like to give your visitors the opportunity to "Buy Now", inform your password-protected website where your thankyou page is (where do you want visitors to go after completing a purchase at your site?) and you're off.
Most providers will allow you to place trial orders, with imaginary credit card numbers, just to test to your satisfaction that everything is running according to plan with your merchant account and ordering system.
Once live, you can log back into your password-protected site and check your orders, customer details, and of course, how much you've earned.
The processing company will take a small amount out of your profits for the service it has provided to you and payment is then sent either by check or deposited automatically into your account on a regular basis, depending on the provider you use.
It really is that simple that even a complete technophobe can be set up in less than 7 days so give it a try and prove to yourself how easy (and profitable) it is.
An Introduction To Accepting Credit Cards on the Internet
If you have a website and you don't accept credit cards then you're losing massive amounts of business. Even if you do accept credit cards it may be worth considering an alternative that will either offer you better rates or save you time.
Infact, if you're within the United States of America or Canada, there are a large range of options open to you.
Unfortunately if you're like me, and are located outside these jurisdictions life becomes a little more complicated - though by no means impossible.
Whatever your circumstances the aim of this article is to give you a quick start in accepting credit cards on the Internet.
Once you understand the basic concepts then hopefully the other articles on this site will help you decide exactly what's right for you.
To enable you to accept credit cards online, there are three methods you can use.
They are:
Gain your own merchant account from your bank
Use a broker or intermediary to gain your own merchant account
Use a third party service
Let's look at these three options in more detail.
The most direct route to gain a merchant account is through your local bank. Many banks will automatically send you details of their own particular service when you open a business account.
The problem with many banks is that as large, powerful institutions many are loathe to accept small businesses and startups.
For example, 12 months or more of audited accounts may be required, business plans or evidence of considerable investment capital.
Add to this the fact that many banks are still developing their e-commerce services. You see, banks offer different types of merchant accounts depending on the situation.
For example, those accounts for retail are usually considerably easier to gain than an Internet account. This is primarily because the retail "swipe card machine" (or PDQ) involves physically swiping the card then checking the signature.
On the Internet of course, the number is just typed in and you can't check the signature so there's a far greater risk of fraud.
Having said that, banks are slowly starting to introduce services to help internet companies, but in today's business climate I feel certain you'd be better putting your time, energy and cash into gaining a merchant account through the second route - using an intermediary.
Intermediate companies do exactly what it sounds - they form a defence between the bank and yourself. Whilst this may at first sound like a disadvantage because there's another body to get authorised by, the matter is quite the reverse.
Intermediary companies understand the banks and what they look for in a new client. They can "pitch" your application right and many boast enviable acceptance rates, even for non-US merchants.
The greatest tip I can give you when applying through these companies is this - minimise risk. Of applicants that do get refused many of them are refused on the grounds of high risk. That's what these companies look for. So wherever possible, find ways to make your business appear a "safe bet" and you'll greatly increase your chances.
I don't mean lie - far from it - you'll end up in far more trouble than it's worth but...
Aim to start small, selling low priced items. Aiming to sell a few hundred $10 items per month is much less risk than aiming to sell 10,000 television sets. Think small to start off with, then expand slowly.
Prove you're financially solvent - some companies will ask you to prove your personal net worth. They may ask about your credit card bill, mortgage and more so minimise your debt wherever possible.
Whilst I have no evidence to back me up on this point I believe that forming a limited company (so you become Pig Farmers Inc. or Swine Herders Ltd.) makes you look more professional and as result less risky. As one can form such a company over the Internet these days for a tiny amount of money I think it's well worth it if in doubt.
You may also be asked about guarantees on your products, monthly overheads of your business, past fraud of any one of a million other questions. For every one you're asked, think - "How can I instill more confidence and make my business look safer?".
It's just like your car insurance. Your rates are better if your car is nice and safe (boring, even), is kept in a garage at night and you've never had a crash, so think of it this way.
Even if you do get accepted, you may well find that if you appear safer, the rates you are offered will be better. If in doubt apply.
You might just get a nice surprise, and the sources we recommend allow you to apply without paying an application fee so there's no risk to you whatsoever.
The third and final method of accepting credit cards on your website is to use a third party service.
In this case, your business itself is not granted it's own merchant ID but rather you utilise the merchant account of another company.
Setting up an account with a third party processor is generally tremendously easy - it's a case of filling in a simple form with your name, address etc. and you're away. Some of these services are free to set up whilst most require a small "activation fee".
For the new startup who have tried unsuccessfully to gain their own merchant ID, third party processing is the way to go.
As with any other method there are benefits and distinct problems with third party processors.
The first benefit is clear - easy, quick and cheap setup. Many third party processors also offer additional services, some paid for, some free.
For example, Clickbank comes with built-in affiliate software as standard.
However, now we turn to the negative side of the story. Firstly, most merchant account intermediaries deposit the money paid by your customers in 24-48 hours. This means that you receive payment swiftly which helps keep your business finances bouyant and enable you to expand your operation faster.
In contrast, third party processors on average pay every 14-28 days depending on the company in question. Some will even pay you mid-month, for the previous month's takings - meaning you may have to wait up to 45 days for the settlement of funds. Clearly this stunts your business and can leave you open to problems.
Secondly, it's fair to say that all merchant account providers, be they bank, intermediaries or third party processors charge fees. This may involve a set per-month fee and/or a per-transaction fee (such as 5% of the value of each purchase). Unfortunately as you might expect, those of the third party processors are generally far, far higher than those charged to businesses who possess their own merchant account.
Lastly in this argument is the fact that you are far more limited in your dealings with a third party service than your own merchant account.
What I mean by this is that you have to send your visitors to their website to make their purchase, which makes you look less professional and you generally have to use the third party processors designated order form, with their name on, though some level of customization is usually possible such as adding your company logo.
In this respect you're simply less in control of matters. And finally, as you are using the third-party processor's merchant account, and not your own, your customers credit card bill will show up the name of the third party processor you have used rather than that of your company.
In general therefore, I'd regard using third party processors as a "last resort" due to their far higher fees and less professional appearance.
So which of these three methods is right for your business? Only you can make this decision but to help you we've created a whole site full of articles in the hope of steering you in the right direction.
It's free to use so please make use of it - and send us your feedback so we can tailor the site even further to your needs.
Best of luck to you and your business!
Merchant Account Terminology
The aim of this article is to explain some of the more common phrases and words used by merchant account providers so you can understand exactly what they're talking about when you're shopping around.
Settlement Time
The settlement time is defined as the length of time between a credit card being charged by your company and the time you actually receive the money in your business account.
This can be anything between virtually instantly in extreme cases to over 3 months with high-risk businesses or poor quality merchant account providers.
Most good quality merchant accounts should have a settlement time of 2-3 days. Third-party processing companies will generally take 2-4 weeks to send you your dues.
Also consider the format of payments - are they deposited directly into your bank account or are you posted a check? The first option usually costs a little bit more (many companies offer you the option) but there's one less thing to worry about - and there's no delay in waiting for checks to clear.
Settlement time is an important consideration because the sooner you get hold of your money, the sooner you can reinvest it (or enjoy it!), so the faster your business can grow.
Discount Rate
The discount rate is the percentage of each transaction that gets taken by the merchant account provider and can range from 2% for your own merchant account to over 10% for third party processors.
In general therefore, you're looking for the lowest discount rate possible.
However, these fees aren't as black and white as they may first appear and you should bear in mind that a higher discount rate may be worth it if other services (shopping cart, digital delivery software etc.) are included free of charge.
As this is a charge based on each transaction, the amount you pay is directly related to your sales meaning far lower risk than high fixed monthly fees.
Monthly Fees
Most proper merchant accounts will charge a monthly fee for upkeep of your account, technical support, shopping cart and payment gateway fees etc.
This is normal and nothing to worry about - the question is what do you get for your money?
Conversely third party processors rarely if ever charge any monthly fee - instead they make their money with higher discount rate fees.
These two factors - discount rate and monthly fees are probably some of the most important points to consider when choosing a merchant account.
Monthly fees must be paid even if you don't make a single sale, but as business grows, a merchant account with monthly fees but a very low discount rate will usually mean you take home far more profit at the end of the month.
So try to think where you'd like to be in 6-12 months time down the line and get a merchant account for that situation - swapping providers whilst running a busy and successful business can be a nightmare!
Reserve Funds
Reserve funds are money kept back by the merchant account provider as "insurance". For example if you were to have more refunds than sales one month then money would be deducted from this fund to cover these expenses. For an intelligent, ethical business you should rarely if ever need to dip into these funds.
In general there are three features to consider here.
Firstly the fund can be built up in two ways. Either an upfront lump sum on acceptance of your application, or secondly as a smaller amount deducted monthly.
Generally paying a smaller amount each month will enable you to get off to a faster start as your capital can be used for marketing and thus growing your business, rather than being tied up in a reserve fund.
The second consideration is how long it will take to get your money back (if at all). Will you start getting it back after a month, six months or when you cease trading? Clearly the sooner you start getting your money back the better it is for you.
The last point to look at is how large the reserve funds account should be. Will you be paying into it for ever more? Or in 6 months time will the money start to filter back to you?
Remember that in general, a smaller sum paid monthly and returned fast is what you're looking for.
Processing Limit
A processing limit is how much money you can take with your merchant account. It's usually based on a monthly turnover and may affect the "ticket price" you can charge (the price of each product) and the monthly cumulative turnover.
In most cases this feature has little bearing - if you're a small business selling items up to $100 then you're unlikely to need to worry about a limit in the tens of thousands. However for merchants selling high priced items (jewellery, cars, investment courses etc.) it's definitely well worth looking into.
Chargeback Fee
Chargebacks are an unpleasant but commonplace situation when trading on the Internet. If you operate carefully you shouldn't encounter too many but high-fraud businesses like online casinos can suffer severely.
A chargeback is defined as the situation in which a customers credit card is charged, and then the customer claims not to have received their product.
Perhaps they received the CD but you don't have any proof of the fact that it arrived so they demand a chargeback. Maybe a criminal used their card fraudulently to buy a subscription to a porn site.
Maybe they just don't recognise the charge (as can happen with third-party processors - they bought something from Ace Investments but there's no sign of the charge on their credit card bill - just a charge from an unknown "Clickbank".
I have experienced this first hand with complaints about not having bought anything, until we checked our records and let them know the product and the day.
Usually, the customer remembers and apologises but it's still a waste of both your times. So if you are going to use a third-party processor make sure you remind each and every customer by email after their purchase what name will appear on their credit card bill.
It may not happen to you often, but you can bet your bottom dollar but in the end it will happen.
Additional Costs
Check what additional costs there may be. Some merchant account providers charge you extra for the use of their payment gateway, others will include it.
Some will charge a monthly statement fee, others won't.
Conclusion
In closing I'd just like to reiterate a few points. Firstly, decide on whether a smaller monthly fee or a larger initial lump sum would be better for your business.
Some business owners (myself included) would rather pay upfront then have nothing to think about from then on. Once you've paid you're set up for life and if you have a lean month you don't have to worry about paying the monthly merchant account fees.
In the long run it will often result in higher profits as you don't have to shell out cash every month.
Others prefer the idea of a small, monthly charge to spread the payments over time.
Once you've decided which model you prefer, it's simply a matter of weighing up the factors outlined in this article - the most important of which are the discount rate and the fixed monthly fees.
Try to find the best service for the lowest money.
Then... the sky's the limit.
Ecommerce Payment Gateways and Merchant Accounts
You will often hear the terms "payment gateway" or "ecommerce payment processing" and suchlike and it's important to draw the distinction between these, and merchant accounts.
Here's the primary difference.
The merchant account is the license, the service that allows you to process Visa, Mastercard and a range of other credit cards online.
However, in contrast, the payment gateway is, if you like, the technological vehicle that passes credit card information from merchant accounts to the banks for them to process the charges.
So in essence, you need both of them in order to process credit cards online. Some startups have been known to get these two mixed up, meaning they carefully apply for a payment gateway, but haven't got the merchant account to begin with.
You have two options. If you already have a merchant account for offline business, go back to the company that provided you with the merchant account service and request to be given an internet merchant account, then apply simply for a payment gateway lease online. Alternatively, most online merchant accounts (especially those we recommend here at Merchant Account Forum) come complete with payment gateway.
Keep your eyes peeled - and ensure you know what you're applying for. All recommendations from this site include both in one package.
Ecommerce Payment Gateways and Merchant Accounts
You will often hear the terms "payment gateway" or "ecommerce payment processing" and suchlike and it's important to draw the distinction between these, and merchant accounts.
Here's the primary difference.
The merchant account is the license, the service that allows you to process Visa, Mastercard and a range of other credit cards online.
However, in contrast, the payment gateway is, if you like, the technological vehicle that passes credit card information from merchant accounts to the banks for them to process the charges.
So in essence, you need both of them in order to process credit cards online. Some startups have been known to get these two mixed up, meaning they carefully apply for a payment gateway, but haven't got the merchant account to begin with.
You have two options. If you already have a merchant account for offline business, go back to the company that provided you with the merchant account service and request to be given an internet merchant account, then apply simply for a payment gateway lease online. Alternatively, most online merchant accounts (especially those we recommend here at Merchant Account Forum) come complete with payment gateway.
Keep your eyes peeled - and ensure you know what you're applying for. All recommendations from this site include both in one package.
Ecommerce Payment Gateways and Merchant Accounts
You will often hear the terms "payment gateway" or "ecommerce payment processing" and suchlike and it's important to draw the distinction between these, and merchant accounts.
Here's the primary difference.
The merchant account is the license, the service that allows you to process Visa, Mastercard and a range of other credit cards online.
However, in contrast, the payment gateway is, if you like, the technological vehicle that passes credit card information from merchant accounts to the banks for them to process the charges.
So in essence, you need both of them in order to process credit cards online. Some startups have been known to get these two mixed up, meaning they carefully apply for a payment gateway, but haven't got the merchant account to begin with.
You have two options. If you already have a merchant account for offline business, go back to the company that provided you with the merchant account service and request to be given an internet merchant account, then apply simply for a payment gateway lease online. Alternatively, most online merchant accounts (especially those we recommend here at Merchant Account Forum) come complete with payment gateway.
Keep your eyes peeled - and ensure you know what you're applying for. All recommendations from this site include both in one package.
Merchant Account Licenses
As described in our article An Introduction To Merchant Accounts, there are two forms of ecommerce payment acceptance - the merchant account and the third party processor.
In order to operate with your own merchant account, you need your own merchant account license. Using a third party processor means you're utilizing someone elses in a legal and legitimate way.
Having the ability to charge people's credit cards is a huge responsibility - after all you've heard all the scare stories of stolen and misused credit cards.
Whilst I believe that these stories are generally over-rated, and due to current legislation and technological security features, using your credit card online is as safe, if not safer, than using it offline, I have still experienced credit card fraud once myself in the past.
Someone stole my credit card details and managed to rack up $600 worth of adult site subscriptions before I received my bill and noticed the problem.
This was four years ago and despite using my credit card online almost every week, I have never experienced another problem.
These days, online merchant account gateways can check where abouts in the world a transaction is taking place from and compare it to the registered address of the card to reduce fraud.
Card security numbers are used extensively (they're the last three digits on the signature strip of a Visa or Mastercard) which means even if someone has your credit card number and expiry date, it's still difficult to make fraudulent purchases.
Furthermore, most online merchant accounts won't divulge the customer's credit card details to the website they're buying from.
And then there's always the chargeback - the process of your bank refusing to make a payment to a company because either your card was used fraudulently or your purchase wasn't satisfactory - even after the charge has been made. It was in this way that I managed to get all my money back when my card was used fraudulently - all's well that ends well.
But all this goes to illustrate my point that if you're looking for a merchant account license - it's a big responsibility - hence all the paperwork involved.
So don't be fearful of a five or ten page application form. The merchant account providers are weighing up your business - trying to weed out those businesses they feel would be unsuitable for this kind of responsibility.
The good news is that in my opinion, with all the recent developments in fraud prevention, plus the competition in the market (and it is fierce - some providers are paying over $5 per visitor in the pay per click search engines!) means that it's easier than ever to get a merchant account license.
The licenses are non-transferrable - you can't gain one then sell it on as the process involves checks on your own business. Much like you couldn't do a driving test then sell your license on to someone else.
And don't forget, if you get refused, or simply don't fancy all the paperwork - you can always use a third party processor - with whom you don't require a merchant account license of your own.
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