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Merchant Accounts
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Taking on-line payments – you don’t actually need a Merchant ID to take on-line payments.
Merchant ID’s are normally issued by your checking account bankers and in most cases will not be issued unless you have proven credit card turnover or a solid business plan that suggests a reasonable level of credit card turnover. Paypal, Worldpay, Nochex and several other payment processors do not require you to have a
Merchant ID or Merchant Account. If you do not have a proven revenue stream, the likelihood is, you will have to use a company that doesn’t require a Merchant ID. However, if your bank will issue you with one, it can be quite beneficial, as it will allow you to approach all the payment processors for the best available rates.
Do your research because costs can vary quite significantly - when you’re first starting out it’s not unusual to pay as much as 4% of your credit card turnover in payment processing charges. Basically, the more turnover you achieve and the fewer charge-backs you generate the less your credit card processing costs will be.
Some companies will charge regular service charges and some have optional guarantee payments to help protect you from credit card fraud. These charges need to be accounted for and if your turnover is low you may decide to use a company like Paypal where there are no service or guarantee payments and a fixed processing cost of 1.9% - 2.9% + $0.30 per transaction, depending on your level of credit card turnover.
The transaction charges can be a real killer, take them into account if your average sale amount is low. Remember, if your average sale is $10.00 then Paypal’s transaction cost represents 3% of your turnover, add this to the credit card processing fee and you could be paying as much as 5.9%. Make sure you build this into your margin when you are working out your product pricing. Either increase the prices of low value items or sell them in multiples to avoid low turnover sales.
Payment processors / Gateways will check your product range and sales process to make sure it conforms with their acceptable levels of risk. They immensely dislike charge-backs and will not consider businesses that are likely to attract high levels of returns and/or fraudulent purchases (we will cover charge-backs in more detail in the “Fraud and
minimizing charge-backs” section.) They will also look at any product warranty you offer because if for any reason you are no longer around they can and will be held legally responsible for any warranty claims made by your customers. Make sure you don’t offer any product warranties over and above that of the original equipment manufacturer. This way the payment processor can offset any liability to the equipment manufacturer in the hopefully unlikely event of your business failure.
If you are planning to use ‘off the shelf’ shopping cart software, I recommend you use one of the main players in the market. The reason being, most of the shopping carts have pre-written controls that allow you to link up with the main payment gateways in a few simple steps. Using a payment gateway that your cart developers have not catered for will probably not be worth the additional work and aggravation. The main players in this market consist of the following:
Authorize.net - www.authorize.net
PayPal - http://www.paypal.com
2Checkout - http://www.2checkout.com
Verisign - http://www.verisign.co.uk
Linkpoint - http://www.linkpoint.com
WorldPay - http://www.worldpay.com
NOCHEX - http://www.nochex.com
Protx - http://www.protx.com
Continue to Creating
a market
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