It's important for all businesses to be able to maximize sales by being able to accept debit or credit card payments from customers on their websites, or indeed face to face.
To be able to do this most businesses require a merchant account to process the payments.
However, for new companies with little or no trading history, as well as those with bad credit, being accepted for a merchant account can often prove a real challenge.
The alternative is to look into using a third party processor who allow almost anyone to process credit card and debit card transactions for a fee. These are sometimes known by the perhaps more familiar term of 'payment gateway'.
Should I Use a Third Party Processor?
The set up costs of a third party processing account are usually far lower than those of a merchant account.
In fact, some have no set up fees at all which can make them very attractive to start up businesses for whom cash flow is tight. However, the transaction fee for this type of account is usually much higher.
Third party processors are easy to use as the provider will handle the entire transaction right through from payment to transferring the money to your account. This means you don't have to worry about paperwork or dealing with problems such as fraud.
Also many service providers are well known by customers and will therefore serve to create a feeling of trust, meaning they are more likely to go ahead with their purchase, PayPal being a prime example.
How to Set Up a Third Party Credit Card Processing Account
Firstly, its important to do your research in order to compare fees and services provided. Check the small print so you know exactly what payment methods your chosen company will accept. For instance, some processors will allow users to pay with money orders or even checks.
Next, you will need to confirm that your types of transaction are supported. Some processors will only take internet payments whereas a few can deal with payment by card in person.
Also make sure payment in your preferred currency is accepted; some processors only accept payment in dollars which may not suit you if your firm has an international customer base.
Finally, once you have signed up to the processor, don't forget to incorporate the new payment gateway into the shopping cart on your website.
Third Party Processors in the US
There are a number of third party processors available for firms in the US. The rates mentioned in this article are correct at the time of writing, but merchants do vary these so be sure to check their latest fee schedule prior to signing up.
PayPal is one of the most well known processors in the marketplace and have set up dedicated business accounts which have much higher limits than those of their personal accounts.
For US businesses, the fee per transaction is currently between 1.9% + $0.30 and 2.9% + $0.30.
CCNow is designed to support businesses that ship tangible assets. They have no set up fee and currently charge 9% per transaction. However, they often reduce this in the key selling months of November and December.
RegNow was created for businesses that sell software. They have a one-off activation fee of almost $20 plus a transaction fee of 6.9%. They also have the facilities to allow you to set up an affiliate program.
Volusion is a web hosting firm that includes credit card processing. This means all their hosting plans include a pre-built online store. They have no set up fees and their transaction fees currently stand at 2.17%.