Accepting Money Online

After developing an idea, a website, and your business plan, figuring out how to actually collect money from your customers may seem easy… but that couldn’t be farther from the truth. There are many options available to today’s online merchant, and there isn’t “one right choice”. Depending on your needs as a merchant, the right solution for you will vary greatly, so let’s take a look at the options available to you.

Full Merchant Accounts

From a professional standpoint, a merchant account is the best method to collect money online. Your company name appears on the credit card statement of your clients, and the transaction fees are the lowest you’re going to get. However, merchant accounts tend to charge a monthly fee that usually falls somewhere between thirty to fifty dollars per month, and the setup can be costly (usually several hundred dollars). This isn’t a problem if you’re moving large volumes, but it can really eat into your margins if you process smaller amounts on a monthly basis.

Depending on your provider, you may be required to get an SSL certificate to secure your website. They start at around forty dollars for budget certificates and go all the way up to several hundred dollars for the top of the line, but most providers have a virtual terminal on their site that you can integrate into your webpage to eliminate the need for an SSL certificate.

One of the biggest benefits with a full fledged merchant account is the support you’ll receive. They’ll usually have a toll-free number you can call to get any problems solved right away. Finally, you should keep in mind that most companies will perform a credit check on you, and may decline your application if you have a poor credit history.

Third Party Merchant Accounts

Third party merchant accounts have the benefit of a cheap start-up cost (about fifty dollars) and no monthly fees. However the transaction fees are a bit higher than a full fledged merchant account, and they display their company name on your client’s credit card statement instead of yours. This can lead to an increase in charge-backs (when a credit card owner initiated a reversal of the charge from their end) because sometimes your clients don’t recognize the charge on their card statement.

A third party merchant account will not let you integrate the payment page into your website’s specific look and feel. You must forward your customers to the stock page of the company, and this can be a huge barrier to sale. Identity theft and crime is a real problem today, so online shoppers can scare easily. Forwarding them from your site to another to make payment may cause them to abandon the order process.

PayPal

What started as a fad payment method in the nineties has grown into a large, internationally accepted method of payment. While PayPal is largely used to pay for online auctions, there are many online stores that use it for collecting money. PayPal has a lot going for it: the sign-up is free, and the transaction rates are reasonable. In addition, you can transfer money from your PayPal account into your bank account at any time, something that isn’t possible with the methods previously discussed.

PayPal isn’t perfect, though. For someone to pay you with PayPal, they must have an account as well - which means you may lose potential customers if they don’t have a PayPal account already and don’t want to sign up for one. Using PayPal as the sole payment method on your site may also give some of your visitors the impression that your site isn’t very professional.

What’s right for me?

Now that we’ve discussed the various options available to the online merchant, it’s relatively easy to decide what solution is right for you. For the serious, high volume merchant who relies on their website as the lifeline of their business, a full merchant account is really the only choice. The stability, customer support and low transaction fees are vital for them to be able to run a successful online business.

An established bricks-and-mortar business that wants to test the online waters, or someone starting a small online business on the side, should start with a 3rd Party merchant account. Not only is the initial investment small, but in the future if the business turns out to be successful, a move up to full merchant account is possible.

PayPal is best suited as an alternate source of payment in conjunction with an existing merchant account, or as a method of payment on a hobby website, since requiring sign up with PayPal can be a large barrier to sale. Unless you are sure the demographic you are targeting is very computer savvy, then PayPal can cost you sales!