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Merchant Accounts Tips

Read these 33 Merchant Accounts Tips tips to make your life smarter, better, faster and wiser. Each tip is approved by our Editors and created by expert writers so great we call them Gurus. LifeTips is the place to go when you need to know about Shopping Cart tips and hundreds of other topics.

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How much does a merchant account cost?

Need an Online Merchant Account? Open Your Wallet

A shopping cart merchant account can be an expensive part of your overall shopping cart software solution. If you're setting up a shopping cart merchant account, shop around a lot to see where you get the best combination of fees and services. You can expect to pay the following:
* Set-up fee: Sometimes these run into hudreds of dollars, but many shopping cart merchant account providers will waive the fee.
* Monthly fee: Expect to pay about $25 monthly to your shopping cart merchant account provider.
* Percentage of each sale: Expect to pay 2 to 4 percent of each sale to your shopping cart merchant account provider.
* Fixed fee per sale: Usually 20 or 30 cents from each sale goes to your shopping cart merchant account provider.
* Termination fee: If you try to cancel before the end of a contract, your shopping cart merchant account provider will charge an extra fee, which can run into hundreds of dollars.

Why should I take credit cards? Don't they cost a lot?

Credit cards and your internet merchant account

Taking credit cards makes your internet store appear professional and inspires confidence. It also means you can collect money from international customers as easily as those in your home town. For your small business merchant accounts to work with your internet store, you will need a "card not present" merchant account, which offers extra security to make sure you can collect your money. You want to make it as easy as possible for people to buy from you, quickly and easily. If the process is too complicated or if people think they'll wait too long by mailing you a check, you will have lost the sale. You will most likely make up for the transaction fees by making more sales, as your online merchant account lets you quickly process your customers credit cards and fulfill the order rapidly.

If I take credit card payments online, can I take them in person as well?

If I take credit card payments online, can I take them in person as well?

Yes. Most merchant accounts have a means of entering credit card information manually so you can process in-person or telephone orders in addition to online orders. Your internet merchant account might also an option to let you process orders over the telephone and include the options of recurring payments, in case you are selling something for a monthly fee.

What is a discount rate?

Discount rates and your merchant account

Merchant accounts typically charge a discount rate, a percentage of the selling price. That's how they make their money. Remember to price your goods accordingly, as you will only be collecting the sale price less the discount rate. You want to shop around and find an internet merchant account with the lowest discount rate, so each sale will cost you less money. An online merchant account has a higher risk of fraudulent credit card use so will typically charge a higher discount rate to cover their risk.

Why your online store should accept credit cards

Accept Credit Cards: Open a Merchant Account

Accepting credit cards at your ecommerce site is now a necessity. If the customer can't use their credit card to buy your products the odds are they'll just leave your site and find an ecommerce business that does accept credit cards. Credit card acceptance increases the credibility of your site and therefore your products.

Accepting credit cards online requires that you open a merchant account and use a gateway processor to communicate between your site, the customer's credit card account and your merchant account. The customer decides which products they would like to buy and includes them in their online shopping cart. When they've finished shopping they check out. The customer inputs their personal information and their credit card information into a form that's hosted securely at your site. The credit card information is encrypted by the gateway processor and sent to the customer's credit card account and then credited to your merchant account. The process is seamless and the customer is probably not even aware that there has been a gateway processor involved in the transaction.

If your ecommerce site offers payment by credit card it's mandatory that a gateway processor is used in the transaction. Accepting credit cards can boost the revenue from your ecommerce site.

If I already have a merchant account for my store, why do I need an internet merchant account?

If I already have a merchant account for my store, why do I need an internet merchant account?

In your store, you can swipe the credit card through a card reader, compare a customer's signature to that on the back of the card, and with newer cards even see a picture of your customer. All this helps eliminate fraudulent use of credit cards. For an ecommerce merchant account, additional steps are taken to ensure that the card is not stolen and this special type of account is called a "card not present" merchant account. This might include comparing billing and shipping addresses or having the customer enter the security code on the back of the card. Your internet merchant account helps ensure that you will collect the payment, as promised, and not be out both your goods and the money. Processing is done in real time, as the order is being made, so you don't have to wait and batch process payments.

What is a merchant account and why do I need one with my ebusiness software?

Understanding your merchant account

Merchant accounts are basically bank accounts that allow you to accept credit card payments. You can set up a merchant account on your own or as part of your shopping cart software. If you don't want to accept credit cards online, you can ask people to pay by check or something like PayPal. If you do set up an online merchant account, you'll typically pay a fee per transaction and a percentage of the amount charged. Some merchant accounts charge you a monthly fee even if you have no sales that month so make sure you understand the details of your internet merchant account before you commit to paying more than you can afford.

What is a "card not present" merchant account?

"Card not present" merchant account

In a brick-and-mortar type store, you present your card to the cashier, who swipes it through a card reader or takes an impression of it. With an ecommerce merchant account, you cannot physically see the card you are charging, so you need a special kind of merchant account called a "card not present" account. An internet merchant account will typically ask the customer to know the billing address and/or the security code on the card. This helps prevent fraudulent use of credit cards online.

How much will it cost for an online sales solution?

Costs Vary Depending on Your Needs

The cost of an integrated online sales solution, combining a shopping cart-based purchasing package with online sales support and CRM software, can vary widely depending on what exactly you want the software to do. But expect to pay at least a few hundred dollars per month for an integrated online solution and even more for a custom, locally hosted solution (unless you're a software expert who can build it yourself). Make sure to decide exactly what sales tools you need to have -- vs. like to have -- before you go out shopping. It can get expensive and you want every dollar your spend to count.

What is a shopping cart merchant account?

You're an Online Merchant; You Need a Merchant Account

A shopping cart merchant account is a necessary, but often little-understood part of your shopping cart software solution. A shopping cart merchant account connects to your shopping cart software, your payment gateway and your regular business bank account. You must have a shopping cart merchant account to take conduct ecommerce on the Web using credit cards.

How is a high risk merchant account determined?

What is a High Risk Merchant Account?

Certain types of businesses have a higher risk than others based on the past performance of that category of business. Any financial transaction has a certain level of risk. The institution granting the funds, or account, determines their fees based on the level of risk. The lower the risk, the lower the fees and vice versa. Some types of businesses have a very difficult time being approved for a merchant account and others won't be approved at all.

The process for a high risk merchant account is more intensive and time consuming than a low risk account. The product is often reviewed as well as delivery times. A criminal background check is not unusual. If the company is transferring from a merchant account that account will be reviewed for charge backs. Sometimes not only does a high risk merchant account charge higher fees but a reserve will be required as well. The reserve is based on the volume of the account. Online businesses have a higher risk than bricks and mortar businesses and so will be charged higher fees. I

f your ecommerce business has been classified as high risk, don't give up. There are firms that assist high risk companies in obtaining merchant accounts.

What are the steps to setting up a merchant account?

Setting Up a Merchant Account

The merchant account is between your business and the bank offering the merchant account. Your business must complete an application and qualify for the account. In some ways, a merchant account is a loan from the bank to your business. Your customer purchases your product and uses the credit card. You fill the order and ship it and process the credit card charge. The bank "lends" you the money until the customer receives and accepts the product.

The first step is establishing your business as its own entity. Merchant accounts can only be awarded to businesses. The business should probably be set up as a corporation or limited liability corporation. You will need to obtain a Federal Tax ID number. The second step is to open a business checking account. If you do this at one of the major banks you have the option of applying for a merchant account at that bank. Having both accounts at one bank simplifies things. However don't automatically use your own bank for the merchant account. You need to compare fees and services as well as convenience.

The third step is to select the bank for the merchant account and complete the application. Finally you'll need to find a gateway processor if the card will be used for online sales. A gateway processor is an independent third party that interacts between your ecommerce website and your merchant account. Setting up a merchant account can mean setting up your ecommerce site for increased sales.

How Much Does A Bank Merchant Account Cost?

The Costs of a Bank Merchant Account

Business merchant accounts are not free. There are various expenses related to the merchant account that will have to be paid. When you're choosing your bank merchant account consider all the fees, not just the transaction fees. Sometimes there is an application fee which is nonrefundable, regardless of whether the application is approved or rejected. Annual fees are charged once a year similar to what some consumer credit card companies charge individuals.

There can be a monthly account fee which will have to be paid even if there aren't any charges made during the month. If a charge is made there will be a transaction fee and a discount rate or percentage of the product's price. There can also be a minimum sales volume fee. If your account doesn't generate sales of specified minimum level you pay the volume fee. The fees are based on the risk the bank assumes by approving the account.

Online transactions are considered riskier than in person transactions because the physical card isn't swiped. It is easier for an online merchant to commit credit card fraud than a bricks and mortar business. Another factor considered in determining the fees is what type of business you conduct. Some types have a higher fraud incidence than others.

Are free merchant accounts really free?

Is There Such a Thing as a Free Merchant Account?

Not really. If your business needs the ability to accept credit cards but you don't want to have to complete the application and process the credit cards yourself, there are options. One of the options is a third party payment processor. These companies don't allow you to use their credit card merchant account. That would be a violation of their merchant account terms. Allowing one business to use another business's merchant account is called factoring. These third party payment processors process the credit cards themselves for a fee and then pay you independently. Or they 'buy' the product from you at a wholesale price (your retail price less their fees) and sell it to your customer at the retail price.

It may sound like a technicality but it's not. Your business does not have access to the customer's credit card information. Nor is your company paid by the bank. The fees are a percentage of the retail product price plus a flat transaction fee. Keep in mind that both fees will be higher than if you had the merchant account for your business. The merchant account fees and a profit margin are incorporated into the fee you pay to the third party processor.

A disadvantage of third party processors is that they can withhold money from your account with them for various reasons. If the customer decides to refuse to pay for the product and requests a charge back from their credit card, the third party processor is responsible for giving back the money. Some third party processors charge a reserve amount to cover these types of occurrences. Others can freeze your account and not allow withdrawals until the charge back amount is covered.

Should my online store have an ecommerce merchant account

Does My Online Store Need an Ecommerce Merchant Account?

That depends on various factors. Individuals are not allowed to have a business, or ecommerce merchant account, so your ecommerce business would have to be a business, not just you acting as a business. You'll most likely have to have a Federal Tax ID number established and a separate business checking account. If your ecommerce site is more of a hobby than a business it may not warrant the extra expense of an ecommerce merchant account.

The bank providing the ecommerce merchant account will look at your business' credit rating and your personal credit rating; if either has black marks the odds are the account won't be approved. Another factor is the volume of sales. If your ecommerce business generates less than $1000 per month in sales then it wouldn't make sense for you to have an ecommerce merchant account. The fees would eat into your profit margin.

You also should consider the number of sales transactions your ecommerce site generates per month and what you sell. There are alternatives to your own ecommerce merchant account and that's using a third party processor. Your site can accept credit cards through the third party. You don't have to have a secure site, gateway, or pay the monthly statement fees.

What Are Business Merchant Accounts?

What Are Business Merchant Accounts?

Business merchant accounts are a method by which your business accepts and receives payment through major credit cards. It's convenient for customers since the majority of consumer product sales these days are paid for through the use of a credit card. Major credit cards include MasterCard, Visa, American Express and Discover Card.

Only established businesses can have a business merchant account, individuals are not authorized to use business merchant accounts. You can not use your business merchant account for personal use; that's a violation of the terms of service for both MasterCard and Visa. It is also a violation of the terms of service for one business to allow anyone else to use their merchant account. In other words if a friend of yours has an online store you can't allow that person to use your merchant account to process their credit card payments.

Here's a simplified explanation of how the process works: Customer uses credit card to pay for product. Business takes credit card information and uses their merchant account to charge the customer's account. The bank that holds the merchant account verifies the credit card and debits the customer's credit card account and credits the business's account. After a predetermined length of time, the bank deposits the charge into the business' checking account.

Why you need more than just a home page, online shopping cart and a catalog to open an ecommerce site?

An Ecommerce Site is More than Just a Home Page

Don't throw together a product catalog, online shopping cart and a home page and think your ecommerce site is ready to go. Your customer needs to trust you before they purchase. One way to encourage that trust is to provide information about your products, of course, but also free information that's related to your product. The free information can be a download-able PDF file or presented online as part of your ecommerce site.

Everyone loves tips and hints. Perhaps you could come up with a Ten Tips Sheet that your visitor can take away with them. Every time they look at the tips sheet it will remind them of your ecommerce site. Product specification sheets are a help to your customers if they are comparing different product brands. Offering a printer friendly version of the sheets makes it easy to compare the specifications side by side which is difficult to do online.

More than one way to contact your company increases the level of trust. Include an email address, phone number, physical address and fax number. An 800 number is a nice touch if the volume of your sales allows it. There are companies who will not only provide the number but also answer the phone for you. Increase the trust level between your company and your customer and you'll increase sales.

What should I consider before I shop for a merchant account for my online shopping cart?

Accept Credit Cards With an Online Shopping Cart

Setting up a merchant account to work with your online shopping cart can be challenging. There are many different banks with different fees and packages, which makes the final decision difficult. To successfully set up a merchant account for your online shopping cart, you should:

  • Ask for a detailed breakdown of all fees and the required amount of sales. Some merchant accounts have lower fees for bigger customers.
  • Find out what the processors you are considering will do if their files are compromised by a hacker.
  • Consider using an easy to set up processor like Paypal until your business grows. Paypal has a short learning curve and is popular with many buyers.
  • NS offers merchant accounts at

How much do I have to pay to set up an e-commerce site?

Minimum Start-Up Costs: About $300 for Bare Bones

How much will it cost to set up a shopping cart merchant account and shopping cart software solution? It's like asking how much you want to invest in property or how much you want to pay for a new car. It can be very inexpensive -- use a no-install shopping cart and an integrated package from a leading provider like Yahoo or FreeMerchant and you can get started for about $300. Or you could pay hundreds of thousands for an industrial strength catalog site. Or you could pay somewhere in between. It really depends on how much you have to spend and how much you are willing to invest in your online business.

Is it worth investing in an online sales solution that only takes a percentage?

No Money Down? Think Carefully Before You Sign

It can be very attractive to find a shopping cart/merchant account online sales solution that doesn't charge anything up front or monthly, and only takes a percentage of your sales. But is it worth it in the end? It depends on how many sales you make. Remember that these providers take a larger percentage of your sales -- 5 to 7.5 percent. If you have a lot of sales or very expensive items, this is going to add up fast. On the other hand, it may be worth it to merchants who don't have a lot of start-up costs. The choice is yours.

Why would anyone choose a locally hosted sales solution?

Why Go With a Local Solution? Customization and Cost

With hosted online sales solutions so complete and so popular, why would anyone choose to develop their own, locally hosted sales solution. Easy answer: More freedom to customize. A locally hosted solution is the only way to get full control over the design and integration of your shopping cart. Also, if you have a very busy, industrial strength store, it might be less expensive to run your own shopping cart and sales solutions, which you can adjust to your own specific needs.

Id EBay worth investigating as an online sales solution?

EBay Works for Millions Every Day

Anyone looking for a complete online sales solution can't ignore EBay. Millions of people buy and sell on EBay every day. There are more millions of browsers -- even better, browsers actually seeking out niche products. And EBay, together with its merchant account provider brothers at PayPal, make it extremely easy to set up a turnkey solution. One disadvantage: You can't really create your own web identity with EBay, since you need to use their pre-determined designs. But if you are a beginning, or casual, online merchant, EBay is one of the easiest online sales solutions out there.

What's the easiest way to set up an an online sales solution?

Here's a Sales Idea: You Become a Supplier

Here's an interesting idea for an online sales solution: How about if instead of having affiliates work for you selling your products, you make yourself an affiliate of a larger site and sell your products through the larger web site? It's an idea that's being used by online sales solution provider 2CO, among others. With these companies, you become, in effect, a supplier to the larger site. For example, if you're selling pens, you advertise your pens on the 2CO site. When someone wants to buy a pen, they pay 2CO, which then pays you. A big advantage here is ease of use and upfront costs. You don't pay for anything until you make a sale. Will it work for you? It depends on what you want to sell and how much work and money you want to put into selling it. But if you want an easy set up, with no initial costs, it might be worth checking out.

How can I choose the right online sales solution for my business?

Make Sure Your Provider Offers a Truly Complete Sales Solution

Developing an online sales solution can be daunting, especially for newcomers. So many prospective Internet merchants turn to well-known e-commerce providers who offer turnkey online sales solutions for one monthly price. But before you settle on Yahoo or Ebay to provide your online sales solution, make sure that your prospective provider can give you everything you need:

* An e-commerce shopping cart, a merchant account and credit card processing are all required from any turnkey sales solution provider.

* How about an integrated affiliate program, which will allow others to do the selling for you? Someday you might even want to develop a public API for your site to allow affiliates to integrate directly with your ecommerce system.

* How about autoresponders, which can automate routine email responses to clients, and prospective clients? Autoresponders can even deliver electronic coupons.

* Think about a secure digital delivery system, which will allow you to sell digital content direct from your site.

So as you can see, a complete online sales solution is more than a shopping cart. Look around and make sure that any provider offering complete turnkey services can live up to its promises.

Are there hidden fees with a merchant account?

Watch Out for Hidden Fees

Here's a list of potentially troublesome fees for you to check with your shopping cart merchant account provider. If your shopping cart merchant account provider charges any of these fees, it might be time to look elsewhere:
* Chargeback fees
* Retrieval fees
* Termination fees
* Gateway fees
* Per Item fees
* Hidden setup charges
* Non-refundable setup charges
* Batch fees
* Cancellation fees
* Minimum fees
* Pass through fees (these vary)
* Over limit fees
* Voice Authorization fees
* Non-Sufficient Funds fees
* Bank Setup fees
* Daily Close-out fees

Do all ebusiness solution providers let me take credit cards for payment?

Ebusiness solution and credit card payments

Merchant accounts are what allow you to accept credit card payments. You'll also need a payment gateway to process the transaction. Sometimes an ebusiness solution will include a merchant account and/or a payment gateway with their service and other times you'll need to sign up for these separately. You may pay a charge for each transaction or a minimum fee rather than a percentage if your items are low-cost. Setting up a merchant account on your own may come with a large monthly service fee. This could be worthwhile if your income is high enough, but if you don't expect high sales in the beginning you may want to avoid signing up for a merchant account on your own and find an ebusiness solution that handles that for you.

Where can I see a good model of an integrated online sales solution?

Amazon: World's Biggest Ecommerce Model

If you're looking for a model of a total online sales solution that integrates an ecommerce shopping cart with effective sales and marketing tools, is a great example. If you've shopped regularly at, you've likely noticed some or all of the following:
* uses cookies to recognize you each time you return.
* makes shopping suggestions based on previous shopping patterns.
*'s ecommerce shopping cart remembers items you put in the cart but didn't buy on previous visits.
* sends opt-in emails to customers suggesting purchases based on previous shopping patterns.
* has an effective and well-known affiliate sales program.
* uses electronic coupons directly integrated into the ecommerce shopping cart.
* allows anyone to submit reviews and comments about products to create an effective consumer review bank.
Amazon has spent millions developing custom tools. But most of these applications described above can also be purchased as part of a small business online sales solution, often as integrated parts of an overall hosted ecommerce package. So Amazon is a great model to study as you attempt to build your own online sales solution.

What is affiliate program software?

Put Your Customers to Work for You

Many ecommerce sites, from giants like and eBay to small, idenpendent sellers, find sales affiliate programs to be an important part of an integrated online sales solution. Affiliates are customers who agree to sell products or services for you through other web sites in exchange for a commission on every sale. To run an affiliate program, you will really need affiliate program software to manage and track what the affiliates are doing for your business and what they should be paid for doing it. You can find affiliate program software bundled as part of an integrated online sales solution or purchase it as stand-alone software.

How can I find an integrated online sales solution?

How Do I Build an Online Sales Solution?

With a web-based or ASP model, you can sign up online with a credit card and can almost immediately begin building your online sales solution, shopping cart, etc. These services are billed monthly and all IT work and server maintenance is handled by the provider. However, if you have an exisitng ecommerce business, or have the time, energy and staff to create a custom solution, you can build exactly what you want. Either way, it's worthwhile to spend a lot of time researching what online sales solution tools would be most effective for your business.

How can I advertise my site?

Tracking Your Paid Advertising

Advertising and ad tracking is another critical component of an overall online sales solution. If you want people to come to your site, they need to know about it. Today, the most popular and effective form of online advertising is paid search ads from search giants like Google and Yahoo. However, many online advertisers still find traditional banner ads to be effective. Whichever you choose -- or if you choose both types of ads -- you're going to need sophisticated ad tracking software to determine your ROI with the ads. Sometimes, ad tracking software is built into an integrated online sales solution. If not, you'll need to investigate independent web-based or locally hosted ad tracking software. Either way, you need to have it if you're going to pay for online advertising of any type.

I have ecommerce shopping cart software. What else do I need?

Use Software to Help Prospect, Obtain and Retain Customers

The easiest part of putting together an online sales solution is the ecommerce shopping cart software itself. Then you add a shoppng cart merchant account, payment gateway, secure server and product database. You have everything you need to sell goods and services online. Except that's only part of the online sales solution. What else is there? Prospecting, obtaining and retaining your customers through email outreach, affiliate sales programs and follow-up marketing and other customer relationship management (CRM) functions. Since you're running your whole business online, many of these functions can be Internet-based and even automated. If you're building an online sales solution with an e-business, look into integrated software that offers marketing and CRM solutions along with the Internet shopping cart software.

Where can I find a good shopping cart merchant account provider?

How to Choose a Shopping Cart Merchant Account

There are thousands of shopping cart merchant account providers, which makes sense given how profitable it can be to sell them. So how do you choose the right one? Do your research, especially on the complete fee structure being charged by your shopping cart merchant account provider. Here are ways to research shopping cart merchant account providers:
* Web sites that compare shopping cart merchant account services and software.
* Ask other Internet merchants who they use for shopping cart merchant account providers.
* Find out if your current business bank offers a shopping cart merchant account and see if you get offered a discount for staying with the bank for this new account.
* Study the details of any shopping cart merchant account offer to make sure you clearly understand the fee structure before signing on.

How does a Tell-a-Friend form work?


Viral marketing can be a very efective part of any online sales solution. Viral marketing is all about creating a buzz with a specific product or service and then enabling your customers to tell other potential customers about the product or service themselves. Creating the buzz is up to you as a business owner. But good online sales solution software will help you enable the connection chain with a tell-a-friend form. Put tell-a-friend forms on your site, adjacent to the product or service that's creating a buzz. More sophisticated or custom software will even allow you to create rewards for telling a friend or to expand the tell-a-friend system to other parts of your site. Even better, adjust your form to allow someone to tell five friends, or 10 friends. You get the idea.

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Patricia Walters-Fischer