Web Business 101
An introduction to opening your own business on the web.

Merchant Services

This has to be the biggest headache of anything that I ran into setting up my site. I had my site up and running, distributors located, stock on hand, everything else set in a month. Once I decided to offer credit card acceptance things went South in a hurry.

A merchant's services provider is the organization that actually takes your sales information (total price to be charged to the customer, credit card info) and submits it to the specific credit card company (Visa, Mastercard, etc...). Normally they are a bank of some form or another. The transaction is processed, and the total, minus various and sundry fees, is deposited to your business account.

As for those fees, heres the normal ones you will see:

· Initial startup/software fee: Most merchant's services have some form of initial setup fee. Either a software package, account setup, or just general purpose pay to play fee that ranges from free to $1200. Far as I can tell its arbitrary as heck, so shop around.

· Transaction fee: This ranges from $.20 upwards to $.50 per individual credit card transaction processed.

· Discount fee: A fee charged by the credit card company on the total amount you charge to them. Ranges from 2.29% to 2.99%. There is normally also a minimum monthly amount for this fee, as in if 2.29% of your total sales does not equal the minimum, they round up. Normally $20 to $25.

· Statement fee: yes, the merchant service's company charges you money to give you a statement of transactions each month. Ranges from $9 to $12 a month.

· Real time transaction gateway fee: If you do real time credit card approval, often there is an additional fee for this. Normally $15 to $20 a month.

There are literally hundreds of companies providing merchant's services out there, just do a search on "credit cards" or "merchant service" and you'll see what I mean. What I have found is that most are Agents of a few large parent companies or banks. My company, Merchant's Choice Card Services, turned out to be a contracted agent for Woodforest Bank out of Texas, so it pays to shop around as each agent has their own profit margin added into the initial setup.

Now there are a couple of other options here. Search on "Telecharge". This is a service for new businesses where you can just use your telephone for each order. Its an automated system where you key in total and credit card number on your phone via a 1-800 number, and receive an authorization number. Most often they have no monthly minimum fee, nor any initial startup fees. The limitations here are a maximum amount per month, normally $1000 to $4000 per month, so you can rapidly outgrow them. Another downside is that often the transaction fees are in the $.35 to $.50 range, and discount fees are often higher. But it is a way to start immediately, and it also is good for the credit impaired people.

Next page: How good is your credit?

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