Merchant Accounts: Helpful Tips For The Online Business Owner
Congratulations! Youve decided to open up an online business
. You know precisely what kind of products or services you want to sell. Youve come up with a marketing strategy after completing countless hours of research and legwork. Youve even positioned yourself on search engines to increase traffic to your site. There are already quite a few customers ready to check out your site and make purchases.So exactly how are you going to get paid?
Obviously, you cant take cash over the Web. So you have to accept credit card payments to earn revenue. But that means enlisting a merchant services provider to process credit card transactions. Which one works best for your business? And how can you keep costs down while staying efficient and secure? Here are some tips that can assist any online business owner.
Know Whos Involved
Theres more to credit card transactions than just the customer and the business. There are the credit card companies that supply the credit cards and govern how businesses can accept them. There are the banks and other financial institutions that issue the cards to consumers. There are the acquirers that facilitate communication between the merchants and the banks. There are the member service providers and their sales agents who are responsible for supplying equipment, software, and other systems necessary for credit card processing to take place. And there are the platforms and networks on which the actual processing of transactions takes place. Understanding all of these entities and how they work together will help you determine who to contact should a problem arise with your merchant account.
Consider all the Cards
You may be thinking about keeping costs down by accepting only certain credit cards. When making this decision, keep in mind that about five out of every six credit card transactions involve either a Visa or MasterCard. American Express accounts for about 13 percent of all such transactions, while Discover comprises just 4 percent of that total. So unless there are unusual circumstances, be sure to include Visa or MasterCard in your menu of credit card choices.
Understand the Fees
Most online merchant accounts charge a discount rate on each credit card transaction. This rate is a percentage of each transaction that will go to the credit card processor usually between 1 and 4 percent. There are also transaction fees that are often assessed each time a payment is processed, regardless of the amount being paid. When choosing a merchant account, consider the size and volume of transactions that you are expecting. If you are anticipating large purchases from your customers, you may want to shop for a lower discount rate. But if you foresee a high volume of transactions, you may want to opt for a plan with low transaction fees.
Identify the Surcharges
There are other costs associated with processing credit cards online. An interchange fee is basically a charge for the privilege of using the communications network between the card processor, the issuing bank, the acquirer and the member service provider. Most of the data pertinent to credit card transactions passes through this interchange. There is also an address verification fee which is assessed per transaction. This fee, which is required by Visa and MasterCard for all online purchases, involves recording the three or four digit code on the back of a credit card, which helps prevent fraudulent use of stolen credit card numbers.
Also, your business may be assessed a fee if it does not meet a monthly minimum amount established by the credit card processor. This is often the difference between your companys actual monthly revenues and the established monthly minimum level. Finally, some merchant accounts charge setup fees, application fees or cancellation fees to business owners.
Avoiding Chargeback Fees
As an online business owner, you should do everything you can to avoid chargebacks, which occur when a customer disputes a charge from your company that they receive on their credit card statement. Credit card companies assess hefty fees on merchants for each chargeback, and too many of them can result in a significant jump in your discount rate.
The most obvious way to avoid chargebacks is to make good on your promise to your customers by delivering the purchased product or service in a timely manner that meets the customers expectations. If a customer contacts you with a problem, you must make every attempt to resolve the issue before the buyer disputes the charge on his or her statement. You should also make sure that your business name is properly displayed on your customers statements; if this is not the case, the customer is much more likely to forget the transaction and dispute the charge. This applies to companies who may be incorporated under one name but are promoting their offerings on the Internet using a different one.
Online business owners who select the right merchant account have an advantage over their competitors. Companies who do not enjoy this seamless relationship with their credit card processors suffer reduced efficiency, higher fixed costs and possibly even lost business due to system down time. So it is vital that every online business owner puts as much time and effort into choosing a merchant service provider as he or she does with other aspects of starting a web-based business.
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