Beginners' Guide to E-Commerce
Internet Merchant Account
An Internet Merchant Account is a special account that permits the
acceptance of credit cards over the Internet. Transactions are processed
online, in real time. While the customer waits, the system checks
the credit card to be sure that it has not been reported stolen,
has not expired, and is listed to the same address that the customer
has provided. If the card is approved, both customer and merchant
are notified that the sale has transpired. This type of account
is a stricter banking relationship than one involving face-to-face
transactions. Web transactions do not gather signatures from purchasers
and therefore there is a higher risk of
This method of accepting payment is the #1 most important ecommerce
method you can offer your customers. Without it, your sales will
be much less than need be. Many banking institutions are providing
Internet Merchant Accounts to eligible merchants. However, it is
even more difficult to arrange this than it is to get a regular
If you are accepted for an Internet Merchant Account through your
bank, you must ensure that the online transactions occur over secure
lines (often called Secure Sockets Layer or SSL). In some cases,
the bank will provide the secure lines as a component of their package.
In other cases, you will be responsible for making your own arrangements.
Your web site host might offer secure lines for an additional price,
or you can enlist the services of one of the many companies that
provide this service.
Note: If you are making a purchase online, you can tell whether
you are on a secure line. In
Internet Explorer, a little gold padlock will appear at the bottom
toolbar indicating that it is
secured. In Netscape Navigator, a similar symbol will appear.
Credit Card Processing Services
Similar to high-risk processors, these credit card processing services
provide highrisk merchants with the ability to accept credit card
transactions online. Many have arrangements in place to process
all of the major credit cards. Processing services handle the transactions
on your behalf, then issue you payment for sales according to a
pre-arranged schedule. You do not need a secure line at your own
web site, since the actual transaction occurs on the processor's
site, not on yours.
Arranging for these services is easier than getting a merchant account
through the bank. Although you will probably be asked to pay a lump
sum at startup, it will be much less than a bank would require.
Card processing companies have sprung up like mushrooms. Visiting
an Internet Search Engine like Google (http://www.google.com) and
running a search for "Accept Credit Cards" will give you
so many listings that making a choice can be difficult.
Remember caveat emptor (Buyer Beware!) Not all processing services
are equal and not all are reliable. Horror stories abound about
processing services that don't measure up. Before you sign on the
dotted line, consider the following:
1. What happens if your processor goes broke or
shuts down? In most cases, you will lose the money you invested
in their service, as well as any sales fees that are owing to you.
You will want a company with a stable record.
2. What is their track record for transferring
sale funds to their merchants? Do they transfer every couple of
weeks or might you wait for months to be paid?
3. Do they collect any local taxes that may apply
to sales coming from your own country, state or province? If they
don't, you are the one who will have to make things right with the
4. Do they provide timely and accurate sales reports?
Without proper reports, you won't have the income tax information
that you require come tax day, nor will you have the full information
you need to analyze your sales figures.
5. Are they using the sophisticated technology
that can intercept credit card fraud before it happens?
6. Do they respond promptly to email or phone messages?
How is their customer service?
7. What are the terms for canceling the contract?
Are you locked in for an extended period? Is there a hefty penalty
So how do you find a service with a good track record?
First, avoid the "Accept Credit Card" spams that fill
your email mailbox. It's a good idea to subscribe to one of the
mailing lists that Internet Merchants use, then ask list members
what services they are using and what their experience has been.
Be cautious of effusive
testimonials. At least some of the glowing testimonials that you
encounter are written by marketing professionals and given to associate
resellers to distribute as their own opinions.
• I-Sales, published by John Audette from Adventive is an
excellent mailing list to read. Members are generous with their
advice and willing to share their experiences. Subscribe for free
• Canadians will benefit from subscribing to the Canada Talks
Business mailing list. Subscribe at http://www.canadaone.com
• For other business- related discussion lists, check out
the offerings at Yahoo Groups. http://groups.yahoo.com/
Credit card processing companies charge an array of fees for their
service. Since the processor is essentially taking a risk on your
behalf, expect higher transaction fees than a bank will charge for
a Merchant Account. Shop around and compare rates, but realize that
cheaper is not always better. A low-priced service may not be building
the necessary financial reserves and therefore may not have long-term
stability. Remember, if they go broke, you lose your startup fee
and any other monies tied up in their service.
Here are the fees that you might reasonably expect to be charged:
1. A set up fee.
2. A monthly service fee
3. Transaction fees per sale
4. Credit card discount fees (a percentage of the
5. Holdbacks. As a safeguard against chargeback
losses, many resellers will hold back a percentage of each month's
transactions for a period of several months. Since they do not require
the sizable deposit that banks require, they protect themselves
6. Chargeback fees. (Can range as high as $50 or
more per chargeback)
7. Fees to transact merchant-issued refunds.
One final thought on card processing services. Almost all of the
services you encounter on the Net are available only to residents
of the US. Residents of other countries check the section for International
ClickBank Company's card processing service has been highly recommended
for persons selling digital products (files, software, ebooks, digital
music, etc.). The setup fees are modest and the service is said
to be available to merchants anywhere.