Do You Take Credit Cards?

Learn the ins and outs of merchant accounts and decide which is best for you.

by staff writer
- Jan 20, 2009

Paper or plastic? Customers are used to hearing this question at their local grocery stores, but they also want the option when shopping online. The choice may be even more important because it pertains to the form of payment they can use to buy goods.

In fact, 85 percent of online purchases are made with credit cards, so merchants will miss out on a lot of business if plastic is not among the available payment options. Indeed, eBay sellers are now required to offer it as a payment option.

Finding the right credit card service may seem daunting. How do merchants know they're getting the best deals? That concern becomes even greater for low-volume sellers who may worry the fees that come along with credit card processing services outweigh the benefits. According to A1 Merchant Accounts, a merchant service provider, many small businesses don't know as much as they should about merchant accounts. So let's take a look at some of these services and see if those who pass on them are right to do so.

Sorting through the details

Fees: A good credit card processing service should be two things: cheap and fast. It should approve customers in an effective, speedy manner and have low or no transaction fees. However, most will charge a one-time startup and monthly service fee.

"You will be hard pressed to find a provider that does not require this type of fee," reports Andy Quick, co-founder of, a free Web hosting directory.

Fees shouldn't surpass the tens of dollars bracket, though. If they do, you're paying too much.

Available representatives: It's also important for merchants to have a provider they can count on at all times. Who knows what problems may occur in the wee hours of the morning—remember, many online shoppers may be perusing outside the usual 9 to 5 operating hours of brick-and-mortar stores. If buyers or sellers have a problem, they should be able to contact someone quickly and easily.

Sales volume: The amount of business merchants do every month is also important to consider. High-volume sellers want services with lower discount rates—that is, the commission the provider gets on every sale—and higher transaction fees. The opposite is true for low-volume sellers.

For those who bring in $100 a month or less, a merchant account may not be the best option. Paying $10 to $25 a month for the credit card service, plus transaction and shipping fees, plus eBay costs could take a good chunk out of your profits.

Now that you know what features to look for, let's explore the pros and cons of some specific services.

For those who bring in $100 a month or less, a merchant account may not be the best option

Site reveals top services

TopTen Reviews, a site that researches software, Web services, music and such, recently released its list of the top credit card processing services, which were evaluated based on average approval ratings, monthly costs, startup time and fees, customer service and other features. Here are the top three from the list:

Flagship Merchant Services: "An outstanding credit card processing company," says TopTen Reviews. Whereas most providers take four to six days to approve business applications for services, Flagship is the underwriter for its plans, so it will approve companies within a day of getting an application. Additionally, Flagship doesn't have start up fees and merchants get their money two days after purchases are completed. An added plus is that users only have to sign up for a one-year contract, not two to three like with other services.

The company also offers the lowest monthly rates, including $10 for gateway fees, $7.95 for statements, 24 cents per transaction and a $15 transaction minimum.

Merchant Warehouse: Good customer service makes Merchant Warehouse stand out, reports TopTen Reviews. It approves 99 percent of applicants and doesn't require an initial start-up fee. However, monthly fees are slightly higher than Flagship at $25, although transaction fees only run 21 cents. Merchant Warehouse also has a $25 charge-back fee, a 65-cent authorization fee and a 5-cent address verification fee, plus a $10 monthly payment gateway fee for online sales.

goEmerchant Merchant Accounts: Here again, there are no startup fees, and businesses get approved within 24 hours of applying. The monthly gate way fee is $19.95, with a minimum of $15 in transactions per month. Statement fees are slightly more than the other two options at $10 and transaction fees are 30 cents. But the service does not charge an address verification fee and it offers a toll-free support line. Users can also e-mail questions to the company's customer support staff. If that doesn't seem personal enough, they can chat live with support staff through goEmerchant's Web site.

Sellers who would rather deal with a bank could opt for an Internet merchant account, which allows them to accept credit cards. However, not too many banks offer these. "Transactions conducted over the Internet are totally different from face-to-face transactions, where a signature is required to authorize the purchase," notes Quick of "This makes online transactions prone to credit card fraud. Fraud protection should be one of your primary considerations when choosing an Internet merchant account provider."

What about PayPal and ProPay?

PayPal is another venue merchants can consider. eBayers use it all the time (in fact, eBay sellers are now required to offer it as a payment option) and it's easy for buyers to use. Once an account is set up, all you need is an e-mail address and password to make purchases. In most cases, payment shows up in the sellers account instantly.

Buyers pay no PayPal fees and there are no monthly fees for sellers, either. Transaction fees for Premier/Business seller accounts are up to 2.9 percent of the total transaction amount, plus 30 cents. Smaller sellers, or those who complete a lot of sub-$10 transactions, may appreciate the Micropayments plan, which offers fees of 5 percent plus 5 cents.

While PayPal provides ample fraud protection for buyers and sellers alike, sellers may be less than thrilled to find their funds can be withheld for up to six months if a buyer files a claim

Users can withdraw money from PayPal at any time for free, and buyers get 1 percent back when they purchase items through the service. But users should be careful, according to Ralf Schwoebel's blog on

"Once you configure your account, spending becomes very easy and if you type in your password and click a button after that, the money starts to travel," Schwoebel says. "That means, if you give your passwords into the wrong hands, you lose control over your money in the PayPal account."

Another drawback to this option is the wait time. Some users may wait up to five business days to access their deposits, which frustrates some buyers. And while PayPal provides ample fraud protection for buyers and sellers alike, sellers may be less than thrilled to find their funds can be withheld for up to six months if a buyer files a claim.

ProPay, one of the few payment options allowed on eBay, has annual fees ranging from $34.95 for the basic program to $299.95 for its platinum option and allows sellers to accept Visa and MasterCard as well as Discover and American Express when sellers opt for Premium and higher level accounts. Users can also transfer ProPay funds to their checking accounts for a small fee of between 10 cents and 35 cents. And a nice feature of this is that ProPay provides you with a line-item summary of fees for every transaction. The company's customer service representatives are available Monday through Friday from 7:30 a.m. to 8 p.m. Central Standard Time.

eBay PowerSellers have a lot of options with ProPay. Silver, gold, platinum and titanium PowerSellers can sign up for eAuction Accounts. This allows them to accept credit and debit cards quickly for $24 a year. That fee could be reimbursed through a $24 processing credit if sellers do more than $3,000 of transaction volume within the first six months of activating their account. There is a 30-cent transaction fee.

Now that you know the ins and outs of credit card processing services, you're ready to decide if you should venture into the world of credit card processing.

About the Author

Auctiva staff writers constantly monitor trends and best practices of those selling on eBay and elsewhere online. They attend relevant training seminars and trade shows and regularly discuss the market with PowerSellers and other market experts.

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