Choosing an Internet Merchant Account

Internet merchant accounts are those accounts wherein payments made with credit cards can be transferred to a specified account by customers making purchases online. These are operated by a third party on behalf of the merchants.

Internet merchant accounts accept all kind of online payments to make it an easy transaction for the consumer.

How It Works

Credit card payments routed through your web site requires many interrelated components. Three layers lie between the customer and your bank account: 

Payment Gateway - This transmits a customer’s order to and from an internet merchant account. The gateway enables you to accept customer billing information (credit card number, expiration date, and payment amount), validation steps that must be followed and actual billing of the credit card. 

Internet Merchant Account - is an account with a bank that permits you to accept credit card payments from your clients. The payment gateway transmits the billing information to the internet merchant account provider. 

Most banks, however, do not provide online merchant accounts since internet transactions are highly prone to credit card fraud. Security versus fraud is a major consideration in choosing a provider. 

Web Site – Whatever merchant provider and gateway service you choose, your website needs to integrate with your service providers. Most providers should include detailed web integration procedures. 

Costs

Determining the total costs of your provider can be risky. Typically, an internet merchant account will charge up front Application Fees, Fixed Transaction Fee, Termination Fees, Miscellaneous Fees with a Discount Rate. 

Up Front Application Fees

This covers costs for processing your application. Many providers will often waive these fees. 

Fixed Fee

The majority of providers require a monthly fixed fee referred to as your statement fee.  They will also require you to pay a monthly minimum of $25. This means you will pay an additional $25 per month (aside from the monthly statement fee) just to have a merchant account . 

Fixed Transaction Fee

Ranging from $0.20 to $0.30, this is the fixed fee portion of each sale. This fee is the same for every type of transaction.

Termination Fee

This may apply if you cancel your merchant account within a specified period of time. Some providers require a long three year commitment. 

Miscellaneous Fees

If a customer requests a refund to be credited to their credit card, an internet merchant provider will charge you a separate fee (about $10 - $20). Read the proposed contract carefully, as “special fees” may be applied to you. 

Discount Rate 

The discount rate – ranging from 2 to 4 percent – is the commission the provider earns on each sale. Theoretically, if the discount rate offered is 3%, and you receive a sale over your web site for $20, you will owe 60 cents to your provider. 

Getting a provider

Before you select your internet merchant provider, study all the cost components. Correlate these with your projected sales data to be able to anticipate what your internet merchant account costs will be.