Why you should believe in Credit Card Payment and importance of Money Order

Even if you have business experience processing payments online can be a real pain. Here again because the internet is booming, new businesses offering payment solutions are starting right and left.

Accepting credit cards is the most popular method for internet
business retail. Its simple for the customer and for the business owner to
accept credit cards online because the paying customer is paying in what
is called “real time”. This means as soon as the customer enters
their credit card number and clicks the process payment button. The
payment is deducted from their credit limit or bank account. So the
products the business is selling can be shipped right away because the
money is there as fast as someone handing the money to the business in
person. Sounds easy right? Well there is a catch. In order to accept
credit cards online the business must establish a Merchant account. A
Merchant account is a bank or financial institution that acts as a middle
man for the customer and the business. To keep things simple, when a
customer pays for something with their credit card that card is verified
by the Merchant account company. Then the money is taken by the Merchant
company and placed in the businesses bank account usually in 2 business
days.

Merchant account companies are everywhere now. Offering low fees and boasting 99.9% approval ratings for their business applicants. You can’t
just open a Merchant account with an online business like you would open a
business checking account. The Merchant account requires a credit
application. Another words the business will need flawless credit. Also
most Merchant account companies require the business to be established for
a period of time before they will even consider a new account. If you
owned a local mom and pop store getting a Merchant account is a breeze.
But any business online falls under the category of “high risk”.
Another words if they do approve the application your going to pay dearly
for their services. It is called high risk because you are not swiping the
credit cards nor are you getting the card holders signature for the
purchase. So what happens if they say they did not order the item or the
number was stolen and used by a thief. You guessed it. The money comes from your businesses pocket. Not only that but the Merchant account company will charge a fee for all charge backs. This is not the worst part of it. The fees charged by a Merchant account company are not flat rates.

Most companies charge a flat fee for each transaction usually around 35 cents. Not so bad right? Well here is the catch. They also charge an interest rate for the total dollar amount. For example a low interest rate would be around 2.5% and to tell the truth most internet businesses would take that rate and run with it.
Lets say your business was selling an item at the amount of $100.00 but
your company purchased the item for at $85.00, so the profit off of this
item would be $15.00. With a 35 cent transaction fee and 2.5% interest
rate the Merchant account company would make $2.85 every time you sold
that item. After you figure in taxes, monthly fees to the Merchant
company, and web costs. That profit margin gets very small. But, as
I said this is a low rate quote. Merchant account rates can be as high as
20% of the total depending on the business. That is $20.00 to every
$100.00 made by the company. This is why there are new Merchant account
companies opening all the time. This is also why you open the news paper
and see new internet businesses filing for bankruptcy. These companies
make more money than the business in some cases.

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