[Ctd] visaplus - Merchant Account Insider Secrets - Accept Credit Cards Online
paul.kholer at gmail.com
Wed Sep 19 10:59:21 PDT 2007
http://www.visaplus.co.uk/ - VisaPlus
The process of learning how to accept payments on the Internet is similar to
the course of figuring out how to launch a business. What at first seems
puzzling and intimidating may be viewed as straightforward and easy to
understand if one has the right guide or manual. The following serves as a
brief primer for any business owner who needs to set up a system to accept
credit cards online, and includes a necessary glimpse of the associated
The savvy business owner who plans to accept payments on the Web must form
an alliance with a payment processing company. There are a multitude of
firms to choose from, and one should exercise due diligence in the selection
process to avoid those that are overpriced and/or do not engage in
fair-minded business practices.
Among the throngs of payment processing providers, there are two distinct
entities: ones that provide merchant accounts and others that proclaim
themselves as "no merchant account" providers. The latter group accepts
payments on the owner's behalf and offers a rather easy set-up. Payments are
taken on their site (not the owner's), and owed funds are forwarded to the
owner two or three times a month.
Merchant account providers (which include financial institutions and
independent sales organizations) assert that they give a more professional
look to an owner's website since they enable the owner to receive payments
on his/her own site. Moreover, they point out that cash flow is less of a
problem since entitled funds are transmitted from customer to owner in
several days, in contrast to their counterparts' record of periodic monthly
Regarding the all-important issue of price, it is difficult to make any
absolute determination about which group offers the overall best rates. For
instance, while no merchant account providers waive many of the monthly
fees, they typically charge a higher percentage of the ticket price. (All
credit card providers charge a percentage of the ticket price, called the
discount fee. Most add an additional charge on top of that -- a flat rate --
called a transaction fee.) As a rule of thumb, if an owner anticipates a
"moderate" amount of transactions online, he/she may be better utilizing the
services of a merchant account provider.
The caveat when choosing a merchant account provider is for the owner to be
aware of all fees -- not just the discount and transaction rates. Because
the terminology used may be different from company to company, the owner
must know the quoted total start-up cost (e.g., set-up fee, application fee,
etc.), and total monthly fee (e.g., statement fee, customer service fee,
etc.) Among fees that are not commonly disclosed --but any astute owner
should ask about -- includes the following:
AVS fee. The fee to determine if the customer's billing address provided by
the customer matches the one listed on the credit card.
The non-qualified rate. The amount that the discount and transaction rate
will be bumped (higher) to if certain Visa/Mastercard requirements are not
met. For example, if there is no AVS match, the owner will likely be hit
with a non-qualified rate. Shouldn't the owner be aware that this transpires
and the fee that results?
Batch fee. This is a small daily fee charged to batch or close out
Chargeback fee. This cost is administered when someone disputes a credit
card charge. It is important to note that an owner may be asked to establish
a "reserve account" at the processor's bank to handle any future
chargebacks, especially if an owner's credit is not very good or he/she is
receiving a large volume of transactions.
Monthly minimum. The minimum amount that the owner must reach in his/her
processing costs. Here is an example to determine this number. Suppose, for
example, an owner had only one sale of $100 for the month. If the discount
and transaction rates were respectively 2 percent and .30, the owner would
pay .02 x 100 = $2.00 + .30 = $2.30. If the monthly minimum is $25, the
owner still owes $25 - $2.30 or $22.70.
After all the fees are provided (preferably without an owner's prompting),
the owner should use good, old-fashioned number crunching, logic and
intuition, and determine who should have the privilege of helping him/her
receive payments from customers. The owner is halfway to completing the
mission of becoming an Internet tycoon or at least being able to receive a
There are four steps left -- the order form, the secure server with
certificate, the gateway, and the shopping cart, if desired. The order form,
either supplied by the owner, his/her Web designer or the processing
company, is simple to design. Once created, it must be on a secure server.
When any customer enters his/her credit card information, it is sent in
plain, unencrypted text form to the server hosting the Web site. As it is
possible to intercept this data, SSL encryption (usually 128-bit) must be
employed. Many merchant account providers offer this secure server with
official certificate. An owner who is going to use a payment processing
provider should not have to spend money on obtaining this.
The gateway component is next. Just as cars use a tunnel to get from one
place to another, the gateway serves as that tunnel to transmit information
from the customer to the credit card processor. At first, within seconds of
the customer submitting his/her credit card information, the processor
either authorizes the transaction or declines it. If an authorization code
is given, the customer's account is not charged, but his/her credit limit is
reduced. Subsequently, the approved customer's information becomes
"captured" and the authorized amount of money is then charged to the
consumer's credit card. This capture becomes part of the merchant's batch
and travels through the gateway again. The processor then knows to finalize
and settle the transaction, and voila, the owner is paid. So the gateway is
actually the owner's gateway towards profit! But the merchant account itself
is the engine that makes the car go.
Many merchant account providers offer a shopping cart that integrates with
their gateway. Even if the owner already has a shopping cart, chances are
good that the gateway can work in concert with it. It is best that an owner
look for a merchant account provider that can serve as a "one-stop-shop,"
providing its own secure server with certificate, gateway and shopping cart.
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