Credit Card Processing (Basic Version)
Doing successfully business on the Internet requires some sort of automated payment processing in place. Imagine a customer ready to buy your services but then not being able to sign up and pay because there is no payment (credit card) processing in place. Don’t let this happen.
During the process of building/starting a business there are several stages of payment processing that you can implement. When you are starting out your own credit card merchant account might be hard to get. Your business has to establish credit first. It might also be way too expensive for you. A real merchant account adds a monthly fee of at least $30.00 to your budget. You also have to sign a contractual agreement requiring at least 1 year of commitment + the payment of a hefty application fee. Many newcomers do consider this a burden they do not want to carry right away. And they are correct. Especially in the beginning it is very important to keep a close look at your expenses. Do not spend money when not really needed.
You can look at a few low-cost alternatives. They require only a small application fee (if at all) and no monthly or yearly commitment. If you do not have anything to process there won’t be any fees. Can’t beat that. What are your low-cost options at all?
Take a look at http://www.2checkout.com, http://www.payquake.com/, or at http://www.PayPal.com.
These low-cost payment processors offer everything you need when starting out. No monthly fees are required to pay – though PayPal offers a full-blown merchant account nowadays. These companies usually offer payment processing for slightly higher transaction fees than it would cost you having your own merchant account, but that is a fair trade-off. They also offer fraud checking on orders, which you would not have when operating on your own merchant account.
So, why is not everyone using these services? What is the catch? We already mentioned the higher fees for the transaction. Reliability is another issue. Your business depends on the reliability of the partner chosen. A 3rd party processing company named Paysystems delivered the perfect example of being unreliable and later even shutting down business and leaving its customers out in the rain. Either Paysystems (Update: Paysystems is no longer doing business as a 3rd party payment processor) or 2Checkout were having problems occasionally. Their sites do not respond properly during these times and you were basically stuck – no payments could be processed. A business might lose a customer in a situation where you are unable to close the deal. Fortunately these things do not happen too often and especially newcomers do not have to expect new customers every minute. Still, this is something to keep an eye on. Due to legal requirements by the large credit companies your customers will technically not be your customers when it comes to the payment processing with these 3rd party providers. 2Checkout requires you to post a message accompanying the sale that your clients are buying your services from them and not from you. This can be very confusing and misleading to the potential customer. Your are also depending on the payout schedule and procedure of the payment processor. Not every business owner feels confident when using a 3rd party provider and trusting them the majority of their business cash flow. By using the 3rd party providers your clients will also not see your business name on their credit card statements but the name of the 3rd party provider. This can be confusing and problematic (possible charge-backs because the client does not associate the business name of the 3rd party provider with the services bought from you.
A good strategy for the new business owner can be to use more than one 3rd party provider. Sign-up fees are low (around $50.00) or non-existing (PayPal). You can rotate through the providers on a weekly base. Therefore your monthly sign-ups would go through different providers on average and you would be spreading the risk accordingly. If one provider goes out of business, you would only lose part of your money until all clients are switched to a different provider. Plan your credit card processing procedure carefully. If you buy 3rd party software for credit card processing – make sure you leave a backdoor open for the time when you switch to your own merchant account.
PayPal: PayPal can be confusing to clients, as it is not that obvious to spot where and how to make a payment when not being a PayPal customer. PayPal should not be your only way of processing credit card payments – unless you choose their full-blown merchant account option. It can be a good idea to offer PayPal as an additional option though. Also – make sure you keep your business and personal stuff separated. ALWAYS have different PayPal accounts for your personal business and for your professional business. PayPal offers great tools to implement everything into your website so that even a beginner has a shopping cart up and running in a short time.