Selecting an Internet merchant account provider or third party processor

2002-06-05by Michael Bloch

Shop around and then shop around some more - this is a very confusing section of ecommerce. If you make enquiries with a company and they don't respond within 24 hours, or are somewhat vague in their responses - run like hell away from them. Many banks/companies employ poorly trained salespeople rather than those with hands-on product knowledge or an understanding the complexities of ecommerce. Ensure they explain all charges to you thoroughly by enquiring about the following rates:

Statement - the charge each month for issuing you statements on all transactions

Application fee - some institutions will charge you for the privilege of applying for an account, regardless of whether your application is successful or not.

Setup fee - once your application has been approved, there may be other fees associated with establishing the account.

Discount Rate - a percentage deducted for each product sold

Transaction - added to the discount rate, a flat rate on each transaction

Monthly Minimum - what you will be charge regardless of the level of sales each month

Reserve - some providers require you to maintain a certain level in the account to cover chargeback fees.

Chargeback - the killer fee which may cost you up to US$30 per fraudulent transaction (which includes any client disputing a transaction successfully).

If you are a new business with an untested product range, consider using a third party credit card processor while you test the waters, which will incorporate a payment gateway with a merchant account. Many of these services will also incorporate a shopping cart application as part of the deal (see links at the end of this article).

These services may appear to cost more, but they can save you from expensive long term contracts and initial outlay on shopping cart applications.

If you intend using a third party credit card processor that combines gateway services with a merchant account, added to the points already mentioned, ensure you also check on monthly gateway fees, AVS costs, and any other added fraud protection you wish to implement.

Rushed decisions in choosing your ecommerce applications, elements and third party services will dramatically increase the likelihood of your business failure. This is definitely an area where if you spend the time fully investigating all the options open to you - you'll reap the rewards after implementation.

It is worthwhile considering contracting the services of an ecommerce consultant to assist you in making these crucial decisions. The fees you pay to a consultant will be returned in increased profits - and less stress.

Reprinted with permission.

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Michael Bloch

Michael Bloch

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