Do you really
need a merchant account?
Deciding when to get your own merchant account for
internet sales can be a confusing and expensive venture.
If you have a small to medium sized business and only
sell a small amount of products then having your own
merchant account may not be the answer for you.
Middle Persons And Binding Contracts.
You might not know it, but, in the initial stage of
setting up a merchant service, your direct contact is
a middle person or a sales agent working for an ISO
(Independent Sales Office). In most cases sales agents
work on a full commission basis and their commissions
are either a straight fee based on a lease amount they
lock you in, or a percentage of sales that you generate
or in some cases, both.
Even though equipment lease is a non-issue for e-commerce
since transactions are processed in real-time by a gateway
company, most merchants find themselves in a binding
lease for a minimum of 3 to 5 years.
Expensive Fees And Minimum Commitment.
Once you are approved by the merchant bank (after a
business and personal credit check), you are required
to maintain a minimum amount of sales per month (or
pay a minimum fee) and in a most cases, limited to making
a certain amount in monthly sales (limited to maximum
amount of sales permitted by the merchant bank).
Some of the costs involved.
Setup fee - Anywhere between $40 - $200 Monthly fees
- Anywhere between $25-$50 for statements and minimum
fees. Per transaction and charges fees - Usually between
2%-7 % in fees and .30-$1 per transaction. Gateway fees
- $10-$30 per month (most gateway companies are charging
a per transaction basis now) SSL certificate - Can be
as much as $250 Shopping cart fee or software purchase
- Monthly can range $20-$70 and software purchase can
be as much as $1400.
In addition to the cost is the technical aspect of
setting up your site to use a shopping cart and real-time
processing. Not all gateways, merchant accounts and
shopping carts play well together. You must make sure
that each can work with each other.
Fast And Easy Way To Accept Payments Online.
Now, if you are a larger business or do a lot of sales
each month perhaps your own merchant account is the
answer for you. It can save you money in the long run.
But if you are just starting out with an online business,
then a third party payment service may be the answer
for you.
Third party companies handle all the background details,
pay the monthly fees, assume the risks of fraud and
charge backs, and handle all the secure shopping your
customers will expect when shopping online.
There usually isn't a set up charge, gateway fees,
SSL charges and shopping cart set up. Depending on the
service you choose, they can give you simple HTML code
to add to your site or allow you to use "buy buttons"
or both. Fees range anywhere from 5.5% to 13.5%. Some
companies charge a set up fee and a per transaction
fee.
Then there is always Paypal. A useful service for new
comers to the online payment arena but it has its drawbacks.
With Paypal:
Your customer must set up an account with them They
can FREEZE your account They can set limits on monthly
transactions Online Payment Solutions:
I suggest you explore all your options and decide what
is best for you financially and technically. A little
research online can save you money and time in the long
run.
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Copyright 2005
If you wish to discuss home business related topics
or learn how thousands of people are making a full time
income, visit http://www.freehomebusinesstips.com/
Abe Cherian is the founder of Multiple Stream Media,
http://www.multiplestreammktg.com/ If you wish to discuss
about credit realted issues, apply for a credit card
and more visit: http://www.creditcardsplease.com/
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