Getting setup to accept credit cards with a credit card merchant account is a relatively easy process and can be done without much hassle. I've put together this brief guide to introduce you to a few components of internet merchant account pricing and a couple of comparisons to Paypal which has a good service as well.
The discount rate on a typical credit card merchant account is about 2.1% to 2.5%. This is what's called a qualified discount rate. Paypal doesn't break these down into qualified or non-qualified rates, they just charge a flat rate of about 2.9% or so. The downside to this is that if you're a merchant accepting transactions mostly from individual consumers, you're overpaying on about 80% or more of your transactions.
Traditional merchant accounts have other pricing categories for their discount rates. These are the mid qualified and non-qualified rates. Although the majority of all transactions go through at the qualified rate, the mid and non still have their place when pricing accounts. The mid-qualified rates are typically the rewards cards or other credit cards with some cash back or other incentive associated with them. The non-qualified cards are government or corporate credit cards or in some other way are deemed "risky" such as when the funds aren't captured until 48 hours or later after the funds were first authorized.
Each transaction has a flat cost associated with it when calculating pricing. These per transaction fees are usually about $.20 to $.30. There is also an AVS fee which if you're processing online transactions through a gateway such as Authorize.Net, you'll have this fee as well. This is usually about $.05 or so. A competitive rate would be $.25 or less including the AVS. Paypal charges a flat $.30 per transaction.
Batch header fees would probably considered by most merchants one of those "hidden" fees. This is a fee that most merchant don't ask about and unless they look closely, don't know about and never question. These batch header fees may be as much as $100 per year or so depending on how often the merchant processes credit cards. What happens is that transactions are batched together usually daily and submitted. Each one of these batches are assessed a batch header fee of about $.25. So, for an easy way to calculate this, if you process transactions every day, you'll be paying $.25 per day. So, even on your busiest month, this fee wouldn't exceed $8 per month.
Monthly fees for a traditional merchant account are usually around $20 or less. For a statement fee or account maintenance fee expect to pay about $10 and for an internet gateway, such as Authorize.Net, you'll probably be paying an extra $10 as well. Work with your merchant account provider to waive the monthly minimum, especially if you're an internet business processing less than $1000 per month in gross volume.
When processing through a regular merchant account, you'll need a gateway in order to accept payments online. You may have heard of Authorize.Net which is one of the more popular gateways. Expect a setup of right around $100 or so for this. If you're getting this setup for much less than that, including free, watch for other fees because merchant account companies will make up for waiving this fee by charging you other fees including a higher monthly or possibly an annual fee. Just be cautious here because like anything, if it sounds too good to be true, it probably is.
Credit card merchant accounts are worth having and with an internet based business pretty much your only real option. There may be a few other ways to get around having to get a credit card merchant account, but not without the expense of losing customers and sales. Make it easy on your customers and yourself by getting setup with an internet merchant account. This can be done easily and without a major hassle. Just follow the above guidelines for pricing and you'll be fine. Check each contract before you commit. Plan on getting setup about 1-2 weeks before you need to go live. This will give you 2-3 days to get approved and a week or so of testing before you go live.
The discount rate on a typical credit card merchant account is about 2.1% to 2.5%. This is what's called a qualified discount rate. Paypal doesn't break these down into qualified or non-qualified rates, they just charge a flat rate of about 2.9% or so. The downside to this is that if you're a merchant accepting transactions mostly from individual consumers, you're overpaying on about 80% or more of your transactions.
Traditional merchant accounts have other pricing categories for their discount rates. These are the mid qualified and non-qualified rates. Although the majority of all transactions go through at the qualified rate, the mid and non still have their place when pricing accounts. The mid-qualified rates are typically the rewards cards or other credit cards with some cash back or other incentive associated with them. The non-qualified cards are government or corporate credit cards or in some other way are deemed "risky" such as when the funds aren't captured until 48 hours or later after the funds were first authorized.
Each transaction has a flat cost associated with it when calculating pricing. These per transaction fees are usually about $.20 to $.30. There is also an AVS fee which if you're processing online transactions through a gateway such as Authorize.Net, you'll have this fee as well. This is usually about $.05 or so. A competitive rate would be $.25 or less including the AVS. Paypal charges a flat $.30 per transaction.
Batch header fees would probably considered by most merchants one of those "hidden" fees. This is a fee that most merchant don't ask about and unless they look closely, don't know about and never question. These batch header fees may be as much as $100 per year or so depending on how often the merchant processes credit cards. What happens is that transactions are batched together usually daily and submitted. Each one of these batches are assessed a batch header fee of about $.25. So, for an easy way to calculate this, if you process transactions every day, you'll be paying $.25 per day. So, even on your busiest month, this fee wouldn't exceed $8 per month.
Monthly fees for a traditional merchant account are usually around $20 or less. For a statement fee or account maintenance fee expect to pay about $10 and for an internet gateway, such as Authorize.Net, you'll probably be paying an extra $10 as well. Work with your merchant account provider to waive the monthly minimum, especially if you're an internet business processing less than $1000 per month in gross volume.
When processing through a regular merchant account, you'll need a gateway in order to accept payments online. You may have heard of Authorize.Net which is one of the more popular gateways. Expect a setup of right around $100 or so for this. If you're getting this setup for much less than that, including free, watch for other fees because merchant account companies will make up for waiving this fee by charging you other fees including a higher monthly or possibly an annual fee. Just be cautious here because like anything, if it sounds too good to be true, it probably is.
Credit card merchant accounts are worth having and with an internet based business pretty much your only real option. There may be a few other ways to get around having to get a credit card merchant account, but not without the expense of losing customers and sales. Make it easy on your customers and yourself by getting setup with an internet merchant account. This can be done easily and without a major hassle. Just follow the above guidelines for pricing and you'll be fine. Check each contract before you commit. Plan on getting setup about 1-2 weeks before you need to go live. This will give you 2-3 days to get approved and a week or so of testing before you go live.
About the Author:
Brian Armstrong is an internet merchant account executive. His focus is on helping internet business owners get setup with their credit card merchant account. This specialization in ecommerce merchant account setups is because Brian is also an internet business owner that knows what it's like to setup an internet business and run that business.
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