The Internet Merchant Account

Searching the Internet for merchant account providers will return thousands of sites hungry for your business.  Most claim to provide the world to you for next to nothing and others are blatant fourth-party webmasters looking for a referral commission.  You are advised to deal direct with merchant account vendors.  A good first stop for a business is to try your current banking institute and also have a quick chat with the other major high street organisations.

Regardless of the bank you choose to approach for a merchant account, you can expect a review of your business to determine if you are merchant-worthy.  There is usually a 7-10 day application process and often a physical site check to verify that you even run a business.  Don't panic if you work from home, it has become common for banks to deal with home-based businesses.  Lavish offices aren't expected or required.

When approaching banks or third-party representatives about a merchant account, here are some considerations to keep in mind throughout the process to make sure you are securing the best relationship possible.

• Prepare a strong, well thought out business plan.  Unless your credit history and assets are golden, just telling the bank what you sell will not be acceptable.  While a complete business plan is probably unnecessary, your sales projections and inventory details may need to be presented in an organised fashion.
• Shop around for the best deal.  Some providers charge less than £200 to establish a merchant account while others charge up to £1,000 for the same amount of work.  Unless there are several value-added features that separate the more expensive from the reasonably priced, take your time to research different companies.
• Read and understand the terms, conditions and anticipated charges carefully.  Don't sign anything until all of your questions are answered to your satisfaction.  Take time to know exactly what you are getting and how much you are paying to get it.
• Make sure the bank or provider has customer service available.  Is there a free phone number to use?
• Is a reserve account required?  There should be none, but if you are a start-up Internet business, have poor to marginal credit, anticipate low volumes, or run a "risk" business, you may be required to establish one.
• How long does it take for funds to be available to you?  This shouldn't be more than 72 hours from the time an order or transaction is settled.
• Read the fine print. twice.  Many web merchants have been burned by sudden rate increases and fee assessments.  Preferably, get your rates in writing and ask for a contracted time that those rates will remain fixed.

Most online payment processors (companies that verify funds and complete transactions) will provide you with the software you need to accept, process and maintain credit card orders. If so, you will only need to furnish your online processor with your merchant number.  In this situation, any equipment or software you buy or lease from your merchant account company would be unnecessary.

Be persistent.  When shopping for a merchant account, look for a deal that best fits your business.  Merchant account agents need you more than you need them, so don't be coerced into outrageous fees or requirements.  Taking the time to find the right company for your business will pay off in time, money and peace of mind.

The Typical Charges

Activation/Set-Up Fee

There is a considerable amount of work performed to establish your account, so expect to pay a set-up fee.  Payment processors typically charge anywhere from £50 to £400 to establish an account.  Any more than this and you need to keep shopping.

Monthly Statement Fee

There shouldn't be a monthly statement fee as many provide online details, but if there is a monthly statement fee, don't pay more than £10.00 per month especially if you are required to pay a monthly service fee.

Credit Card Transaction Fee

This is an expected and usually fairly expense.  It costs time and money to process your orders, and the service these companies provide is critical to your business.  Still, you shouldn't pay any more than £1.00 to process a credit card order.  Most processing companies will charge anywhere from 20p to 70p a transaction.  Sometimes it is cheaper depending on your typical order value to ask the payment processor to take a percentage of the transaction instead of a fixed fee so make sure that they offer this.

Check Processing Transaction Fee

Typically, the fees for check verification range from £1.00 to £2.00 per transaction or a set percentage of the sale (don't pay both).  Check with your online processor to make sure it's available and to discuss how to integrate it with your website.  While the transaction fee is higher than with credit cards, you do avoid merchant account charges with this method.

Monthly Minimum/Service Fee

Most online processors will require a monthly minimum or charge a flat monthly fee.  If, for example, the monthly minimum is £20 in transaction fees and you have a bad month where not one widget was sold, you will still be assessed the £20.

Keep in mind that merchant account fees and payment processing fees are both incurred when conducting a transaction.  Perhaps an example will help demonstrate.

You sell widgets for £100.00 each.  A customer purchases two widgets for a total of £200.00.  Once the customer's credit card is verified and approved, the following cycle occurs:

Your merchant bank collects 2% as its discount points and 25p as the transaction fee for a total of £4.25.  Your payment processor collects 50p for completing the transaction, and you retain £195.00.  Obviously, the rates can differ depending on the merchant, but in this example, you paid £5.00 for the advantage of accepting credit cards as a method of payment.  While it may seem like a lot, odds are the sale would never have been made without it.

There you have it.  All the components you need to pursue e-commerce.  While it may seem intimidating at first, you will find the process to be easy once you are armed with this information.  The best advice is to be patient and look for the deal that fits your budget and your business needs.  You have endless options, the key is finding the one that integrates seamlessly with your website.

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