5 Mistakes People Make With Their Ecommerce Merchant Account
Accepting credit cards is the only easy way to collect payments online. The alternatives are to have someone print something and mail you a check or something like egold which really isn’t a solid solution nor is it convenient. Anything but credit cards online will cause you to lose sales. It’s a convenient way to accept payments and one that you can get without a major hassle.
The discount rate is typically what every merchant asks about when calling me for quotes. Although this is important, I can mark this down very low and still have merchants paying just as many fees as other providers. I guess what I’m trying to say is that don’t overlook other fees when faced with an “awesome” discount rate. Expect to pay around 2.1 to 2.5% for your qualified rate. Competitive rates are usually anything below 2.25%. Paypal doesn’t have a “qualified” rate as much as they just charge a flat rate of 3% which is on the high side. Paypal does a fantastic job of making things very simple and easy to manage. They’re higher priced on some things, but their simplicity makes up for some of the higher price.
A non-qualified or mid-qualified rate will usually add on an additional .5% to 1.5% for these transactions that are “downgraded” because they are either a rewards card which cost more to process or a government or business credit card.
Each transaction also has a cost, no matter how much the volume of the transaction. Makes me laugh sometimes when I buy a $.49 refill at the local convenience store on my credit card because I know that they’re paying at least $.15 to $.18 per transaction if not a bit more which on a $.49 gross volume transaction, they’re probably losing money. No wonder they sometimes just smile and tell me it’s on them. Most internet based transactions run about $.20 to $.30 which is competitive when you compare to Paypal at about $.30 per transaction. Watch for AVS or the gateway transactions as they can easily get their advertised per transaction cost up there.
Unlike Paypal, traditional merchant accounts have a batch header fee. This is basically a daily processing fee. For every day of the month you process transactions, whether it is one transaction or 100 transactions, you’ll have a batch header fee. This is usually negotiable, but something that most merchant service providers don’t talk too much about. A lot of pricing is on a “don’t ask, don’t tell” meaning if the merchant doesn’t ask, the merchant sales person doesn’t tell. Don’t get me wrong, the pricing is all over the application, but unless the merchant asks, certain assumptions are made which may cost as much as a couple hundred dollars per year. When in doubt, ask what each fee is and when it will apply so that you aren’t caught off guard.
Merchant accounts have monthly fees. Paypal has a monthly fee if you use their merchant services. If you’re just accepting payments from other Paypal customers, you won’t have a monthly fee. But if you use them as you would a traditional merchant account where the payments can come from either Paypal customers or individual cardholders without a Paypal account, you’ll have a $25 monthly fee. Traditional merchant accounts can be as low as $10 to $15 per month including the gateway fee. If you’re an internet business just getting off the ground, try to get your monthly minimum waived. This is usually a $25 minimum and can be pricey especially when you’re just getting started.
Processing transactions through the internet also implies that you’ll have additional fees involved. This is usually through what’s called a gateway which is a company or software that will facilitate getting the transaction information from your customer to the bank for processing and is done online. Authorize.net is probably one of the more popular gateways that you’ve heard of. There are a lot more, but only a handful that are compatible with just about every shopping cart solution out there. If you do decide on Authorize.net, plan on a setup fee of about $100 or so. There are plenty of companies that give this setup away for free, but most of them also charge more on the monthly or will charge you the equivalent in an annual fee.
There are some advantages to Paypal over your more traditional merchant accounts. One such advantage is ease of use. Paypal is very user friendly and Authorize.Net as a gateway would be a close second. Most shopping carts are compatible with both and include modules to be able to install both or either. Accepting credit cards is a necessary evil in today’s internet world, but can be done with very little hassle or headache.
Filed under: Marketing