MERCHANT ACCOUNT:
A merchant account is issued by a bank and will allow you to accept credit cards including Visa, Mastercard, AMEX and Discover. You process payment just like your neighborhood retailer would; however, in most cases you will be operating a "Virtual Terminal" as you will not have the physical credit card available. You simply "settle" your account electronically each day and the funds from your daily sales are forwarded electronically to your own business checking account. Once they are in your business account they are available for immediate withdrawal, so you will receive your proceeds quite quickly.
A disadvantage to a small business just starting out is that the fees for a merchant account can be significant, and there are minimum monthly charges. An example of the fees associated with a merchant account would be:
Application Fee: $99 to $249
Transaction Fee: 2.5% + .35 cents of each sale
Monthly Gateway Fee: $20
Monthly Statement Fee: $20
Minimum Monthly Charge: $40
These fees are highly variable and are determined by your sales history, volume and longevity.
MERCHANT PROVIDER:
There are many merchant providers who provide you the ability to process credit cards without applying for your own merchant account. A company called CCNOW.com is one of the largest merchant providers. In order to comply with banking laws they arrange to sell your items on consignment, charge a percentage of the sale as commission, and forward you the balance. They charge a one time start up fee of $9.95 and a per sale transaction fee of 4.99% + .50 cents. CCNOW pays your sales proceeds twice a month. The payment schedule allows for payment 2 weeks after the close of the previous period, so you may have to wait 3-4 weeks to receive your funds, however, the transaction fee is reasonable and there are no minimum monthly fees.
PAYPAL
Paypal is one of the most popular payment systems online today. Paypal is owned by eBay and has generated millions of members by being the preferred payment system for eBay auctions. Paypal also allows you to send and receive money for items sold in places other than eBay. The main benefit is that it's simple to sign up for and FREE to open a personal account. This will allow you to send and receive money for no charge. If you are running a business you will need to upgrade your personal account to a business account. Business accounts charge a sliding scale based on volume, averaging 2% + .30 cents per transaction. Your funds clear into your Paypal account instantly and you can request electronic deposits to your own bank account the same day, so you funds will be available quickly. They also offer business account holders a debit card so you can access your funds directly through your local bank ATM.
CLICKBANK
If you're selling a digital product, Clickbank is the specialty processor for you. Digital products are defined as e-books, programming and personal services. Due to the added risk of fraud and deception, banks that offer traditional merchant accounts will not allow Digital product transactions and will only deal with tangible products. Clickbank has been set up to deal only with Digital products and actively recruits this business through a series of affiliate partners. The fees Clickbank charges are:
Application fee per item: $49.00
Discount Rate: 7.5% + $1.00 per transaction.
Clickbank sends your payments 14 days after the previous payment period ends so it will be 3-4 weeks before you get your funds.
As you can see, there are quite a few options available for your online payment processing. If you generate a large number or a high dollar value of sales, or if you make face to face transactions with your buyers, you will need to secure a merchant account. Small businesses or those just starting out can utilize Merchant Providers, PayPal and Clickbank as their payment methods and save time and money. Take some time to review your business structure, strategies and needs then determine which of these methods is best suited for you.
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