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Online Business L(a)unch™ >
Setting Up a
Website:
Accept Credit Cards
> Merchant Account
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Merchant
Account
Although using third-party credit card
processing company is a good option if you're just starting out,
they can be more expensive in the long run. Once you start
reaching $1000 or more in monthly sales, move to a merchant
account/merchant-hosted API payment gateway system in order to
save purchasing costs and reduce processing time and costs.
But
please beware: if you are not very careful, your merchant
account will cost you a lot more than necessary. If
you expect to do serious online business, then you need a
serious merchant account flexible to your needs.
There’re the several points to consider while looking for
merchant account:
1. Rates and fees:
Make sure rates are fixed and not introductory:
you don’t want your processing fees to increase within a time.
Ask to have it documented in writing.
Check if the paperwork you receive from the provider shows all
rates and fees you’ll have to pay. Make sure all fees that are
not mentioned on their website are posted in writing. Believe
me; almost all providers have some hidden fees.
Check the cancellation policy. Ask about what
happens if you are not satisfied with their service/software. Do
they have a money back guarantee? Make sure there’s no
cancellation/early termination fee. This fee can apply if you
decide to move to another provider and cancel your merchant
account within a specified period of time - usually within one
or two years but beware: some merchant providers require three
or even four year commitment!
Always read carefully the merchant account agreement with your
application before signing it.
Be sure to read the small
print. Always!
If
there’s a minimum contract and cancellation fee or any
additional undisclosed fees you’ll usually find all these (as
well as many other) surprises well
hidden in the small print!
While shopping
around don’t be fooled into super low discount rates and
transaction fees: a deal that sounds too good is probably
suspect. Here are guidelines to follow when rate shopping - if
you find rates that are much lower than ones mentioned here
there’s must be something wrong:
Monthly minimum
($10-$30/month)
Monthly minimum is amount you must pay in your transaction fees
each month. The most common monthly minimum that providers
charge is around $20.00. So if your monthly discount rates plus
transaction fees collected by the bank
are equal or
go over $20.00 for that month, there is no
monthly minimum fee (you only pay the amount you are charged).
If your fees for the month do not exceed $20.00, then you would
be charged the difference. Just to cover your monthly minimum
you should process at least $800 a months. That’s why I do not
recommend using merchant/gateway approach for start-up
businesses.
Reserve
Some providers will require that you maintain a
certain level (determined by your estimated sales receipts) in
the account to cover refund/chargeback fees: the provider will
hold on part of your credit card earnings each month, and
release them usually after 30-90 days. A reserve is usually
required only for person with a bad credit history, for non
US-based merchant or for companies who plan on process very high
volume per month ($100,000 and up) so avoid working with this
provider if possible.
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