As
mentioned above, it is absolutely critical to have a merchant
account so people can buy your product or service with their
credit card. There are however, a couple of different ways to
this as well:
- You can get
your own Visa/Mastercard/AmEx/Discover accounts with a local
bank.
- You get Visa/Mastercard/AmEx/Discover
accounts through a broker (these brokers are all over the
country).
- You can hire
a fulfillment house and use their credit card accounts.
- You can use
a payment type such as Cybercash or First Virtual.
- You can use
a third party billing company (in other words, use someone
else's merchant credit card accounts for a fee).
Details
of #1: If you have a very good relationship
with your bank, and they don't require a security deposit,
it is best to get the merchant credit card accounts through
them. Because some banks only deal with two out of the four
major credit card types, you may have to deal with two different
banks to be able to process all four major credit card types
(usually one bank will have Visa and Mastercard, and another
will have AmEx and Discover).
The problem with
local banks is they are set up to serve retail stores and not
mail order or Internet based businesses so they either charge
a very high "discount rate" or require a very large
security deposit (between $5,000 - $10,000). For those that
don't know what a discount rate is, this is the percentage you
pay on each transaction for the privilege of using their credit
card services. In other words, if you have a discount rate of
2.5 % and you put through a sale of $100.00 you will only receive
$97.50 and $2.50 goes directly to the credit card company.
Details
of #2: Going through a broker is my personal preference.
It is usually very easy to get approved, there are no security
deposits required, and they can get you a great discount rate.
I personally recommend a company called Total Merchant Accounts.
They are Internet
based and you can apply directly online. They specialize in
getting credit card accounts for online businesses (even adult
oriented sites). They have a 98% approval rate. Even if you
have been bankrupt, chances are that they can probably get you
approved. We have had great success and I highly recommend them.
They charge a $125 application fee (all brokers charge a fee
to set you up this is how they make their money don't worry,
it is fully refundable if you are declined). Some others charge
as much as $400.00.
The only other
expense will be that you need a terminal, software product,
or web-based software (whatever you decide) to process the credit
cards (yes, this software will process the credit cards in real-time,
all automatically, just like my order system does that I explained
above). You can buy this outright for about $900.00, but you
can also lease it from them for about $40 a month (this is what
we do and this is what I recommend you do). You should be able
to get a discount rate of 2% to 3%. So basically you get merchant
accounts for $125 up-front and $40 a month. This is very cheap.
If you plan to do business online, this is the best way to go.
What is $40 a month if you plan to be generating thousands in
sales each month?
If you don't want
to use Total Merchant Accounts, there are literally
hundreds of different brokers out there. However, be careful
as there are a few that will take your application fee and give
you the run-around. We recommend Total Merchant Accounts,
as they specialize in online and home based business and we
have used them for years with great success (plus they will
bend over backward to help you). Click
here for their online application form.
This form is not
a "formal" application. It goes to Ed Freeman at Total
Merchant Accounts (which is the "broker", not
the "bank"). This is to help him understand what type
of business you are in and a little about your company (so he
knows the best way to fill out the formal application that goes
to the bank for approval). Just fill out this "pre-application
form" at the URL above as best you can (if you leave a
few fields blank, don't worry, the bank will never see this
"pre-application form"). Once Total Merchant Account
receives your pre-application by email, they will contact you
within 48 hours to go over some specifics and get out a formal
contract to you so that they can set up the details with the
bank. It is super easy and takes almost no time at all. I highly
recommend them.
Note:
As mentioned above, you will be required to lease a processing
terminal to "swipe" the credit cards. You have the
option of a stationary terminal or a software program called
Total Merchant Manager. Make sure you lease the software as
this will allow you to render credit cards through a secure
server as well as process them manually through your home
computer. Don't worry, this is simple software to operate.
Details
of #3: A fulfillment house is a company that is designed
to do all your "dirty work". They will take your orders
through an 800 number with live operators who will keep track
of your customer data base, provide some customer service, process
credit cards, and ship out orders. In other words, they make
running your business completely hands free.
These companies have their own merchant credit card accounts
and will let you use them to process your orders for a fee.
The fee is usually a 5%-6% discount rate instead of the normal
2% to 3% you would pay if you had your own accounts.
If you are only
processing a few thousands dollars worth of orders every month,
this is the way to go. But if you are doing more business than
that, it is more cost effective to get your own, merchant credit
card accounts. Also, please note that most fulfillment houses
will only allow you to charge orders to their credit card account
when the orders come in through the 800 number line (they will
not let you use their credit card account for direct sales from
the Internet), which can cause problems if you are doing any
kind of volume.
As mentioned we
deal with MWC at (1-800-642-9378). Ask for their sales department,
they are great and will help you to the best of their ability.
Details
of #4: As I mentioned above, I do not recommend using
a "transaction company" as it is just to much hassle
for the amount of sales you will lose (which will be almost
nil).
Details
of #5: These third party billing companies let you
use their merchant accounts. Your page would link to their order
form and they charge the customers credit card. They then mail
you a check for all sales 20-60 days after the sale (the time
delay before you get paid depends on the company you are dealing
with and the plan you have chosen with them). These companies
charge anywhere from $200 to $800 for set up fees and then a
percentage of each sale (between 5%-15% depending on your volume
and the plan you pick). It can get expensive, but if you have
a high markup item you are selling or if you are doing really
low volume in sales, it may be a solution. My opinion is to
always get your own merchant accounts as they can be obtained
for next to nothing these days. However, one great advantage
to these third party billing companies, is that if you are a
foreign company that wants to accept credit cards and charge
your customers in US dollars, it is a way for you to instantly
start accepting credit cards for a lower cost in comparison
to getting your our US merchant accounts (which can cost a few
thousand dollars if you are a foreign company). The most well
known company for this is Internet Billing Company
at http://www.ibill.com
ABOUT
THE AUTHOR: Derek Gehl specializes in teaching real people how
to start profitable Internet businesses that make $100,000 to
$2.5 Million (or more) per year. To get instant access to all
his most profitable marketing campaigns, strategies, tools,
and resources that he's used to grow $25 into over $60 Million
in online sales, visit: http://www.marketingtips.com/t.cgi/892189
Article
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