A Quick Guide to Third-Party Credit Card Processors

Jun 7
21:00

2002

Angela Wu

Angela Wu

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If you've ever looked into getting your own merchant ... already know how ... it can be. ... ... fees, standard monthly fees, ... fees... theyall add up fast! It c

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If you've ever looked into getting your own merchant account,
you already know how expensive it can be. Application fees,
setup fees,A Quick Guide to Third-Party Credit Card Processors Articles standard monthly fees, transaction fees... they
all add up fast! It can be too much for a business that's
just getting started.

There is an alternative. Third-party credit card processing
companies handle your credit card transactions for you in
return for a cut of your profits. Setup is typically
either free, or there's a small, one-time fee.

Here's here it works: once you've applied and/or been
approved and paid any applicable setup fees, you create
ordering links for your products. These ordering links
lead to the third-party processor's server, where they
handle orders on your behalf. Credit cards and online
checks are common ordering options provided by third-party
processors. Some also offer a telephone ordering option.

After your customer places an order, that sale is
automatically credited to you, minus the company's
commission. You are paid by the third-party processor
at regular intervals, according to their pay schedule.

So what's the big deal? Why would third-party processors
appeal to startup businesses? Aside from the setup fee,
you are only ever charged IF and WHEN you make a sale.
If you don't sell anything, you're not charged anything.

Here are a few things to consider when researching third-
party processors:

* How much is the setup fee? Don't be put off if there
is one; three of the four processors I use charge a
setup fee, and they've been well worth the small cost.

* Transaction fees. After paying these fees, do you
still make a reasonable profit? I've seen fees
ranging from around 5% to about 30%, with the average
somewhere in the middle.

* Are there additional fees for accepting online checks
or telephone orders? Does the processor even offer
these as options?

* Settlement fees. Does the company charge to cut you
a check each pay period, or to wire transfer your funds
to you?

* How much is the reserve? A 'reserve' is the amount held
back from each pay check as a "slush fund" against future
refunds, returns, or chargebacks. What percentage do they
hold as a reserve, and for how long? It's commonly 10%,
10%, held for 6 months before being released back to you.

* Pay frequency. Most pay either every two weeks, or
once a month.

* Reliability. Talk to others who have used the service
to see if they've had any problems. If your order
processor is 'down', your customers can't buy!

* Restrictions and limitations. For example, is there a
minimum monthly sales quota you must reach? Is there a
maximum product price you can set? Does the company
restrict what the type of content you can sell? Do
they handle only tangible or intangible products?

* Customer service. Does the company respond promptly
and helpfully when you contact them?

* 'Extras'. For example, are there reporting or tracking
capabilities? Free use of a shopping cart?

Finally, here's a short reference list of several third-
party processing companies:

* Clickbank, http://clickbank.com/
* GloBill, http://globill.com/
* Digibuy, http://digibuy.com/
* Revecom, http://revecom.com/
* iBill, http://ibill.com/
* 2Checkout.com, http://2checkout.com/
* Verotel, http://verotel.com/
* CCNow, http://ccnow.com/

As you can see, there are many options, so don't let a
tight budget prevent you from taking orders online! Third-
party processors are both convenient and affordable -- even
for startup businesses.