Accepting credit cards is the only easy way to collect payments online. The alternatives are to have someone print something and mail you a check or something like egold which really isn’t a solid solution nor is it convenient. Anything but credit cards online will cause you to lose sales. It’s a convenient way to accept payments and one that you can get without a major hassle.

Pricing merchant accounts starts with the discount rate. Everybody always asks for this rate when comparing merchant accounts. For internet based transactions, the discount rate will typically be about 2.1 to 2.5%. Paypal is a merchant account provider that charges a flat rate of about 3%. Even though this may seem to be easier to reconcile, it will ultimately cost most merchants more money simply because 80% or more of your transactions should go through at that lower qualified rate.

Traditional merchant accounts have two other “buckets” into which they categorize transactions. One of these is called the mid-qualified which are typically the “rewards” cards or other credit cards associated with cash back or frequent flyer miles, etc. The other “bucket” is non-qualified for cards that are either government or corporate credit cards. There are some other reasons transactions may fall into these other pricing categories and that may be how long it takes for the funds to capture after they’re authorized. Most merchants never have to worry about this because the charges are captured in the same transaction in which they were authorized.

Both merchant accounts and Paypal charge a per transaction fee. This is usually about $.20 to $.30 for each transaction. Merchant accounts add on an additional $.05 usually for what’s called an AVS fee. Even with that $.05 for AVS, most merchant account per transactions can get to be as low as $.25 or less.

Unlike Paypal, traditional merchant accounts have a batch header fee. This is basically a daily processing fee. For every day of the month you process transactions, whether it is one transaction or 100 transactions, you’ll have a batch header fee. This is usually negotiable, but something that most merchant service providers don’t talk too much about. A lot of pricing is on a “don’t ask, don’t tell” meaning if the merchant doesn’t ask, the merchant sales person doesn’t tell. Don’t get me wrong, the pricing is all over the application, but unless the merchant asks, certain assumptions are made which may cost as much as a couple hundred dollars per year. When in doubt, ask what each fee is and when it will apply so that you aren’t caught off guard.

Merchant accounts have monthly fees. Paypal has a monthly fee if you use their merchant services. If you’re just accepting payments from other Paypal customers, you won’t have a monthly fee. But if you use them as you would a traditional merchant account where the payments can come from either Paypal customers or individual cardholders without a Paypal account, you’ll have a $25 monthly fee. Traditional merchant accounts can be as low as $10 to $15 per month including the gateway fee. If you’re an internet business just getting off the ground, try to get your monthly minimum waived. This is usually a $25 minimum and can be pricey especially when you’re just getting started.

If you’re processing over the internet with a traditional account, you’ll need a gateway. Authorize.Net is one of the more popular gateways and although some providers give this away for free, they have costs associated with this and will usually hit you with an annual fee or some other fees along the way to make up for this. Try to negotiate your monthly rates so that they are lower even if you end up paying a little more for the setup. Authorize.Net shouldn’t cost more than about $100 to setup. I’d recommend against leasing as you’d end up paying 5 times as much for the setup over the 48 month lease you’d be stuck with.

Getting setup with an internet credit card merchant account isn’t too difficult and should be considered vital to any internet or ecommerce project. This can be done usually about 1-2 weeks before going live which will give you plenty of time to get your account approved (usually 2-3 days at most) and another week or so of testing. You should be able to get this setup without many problems at all.

Brian Armstrong has been setting up ecommerce merchant accounts since 2002. His focus is in not only helping internet businesses get setup with their internet merchant accounts, but also helping internet business owners with some marketing techniques.

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