Third-party card processing for small businesses

If you are running an online business, there are many advantages in the customers who pay way, with their credit card. Banks are often very careful to provide this facility to apply for small businesses - in particular in insecure environments - such as they more high risk as a larger, more companies established. Therefore, many small business owners use third parties for their credit card processing requirements. About 85% of small businesses are now using this service.

It is important to spend time looking for a prestigious credit card processor that meets all requirements for your business. The cost can vary between the processors. Some companies take only a small percentage of each credit card transaction but it looks to make it profits, for example, somewhere else, sign up fees such as charging greatly inflated. Other processors will pay no joining fee, but you more per transaction for the privilege of using their services. If your company very small, is for example, if you are running a business from home a sole trader, you find out from the credit card processor whether they require a minimum monthly fee must

The options for your business which proves most cost effective sales depends on the nature of your business and your company. If you a merchant account with a bank was rejected, but your business each month receives a steady number of orders and you make a good profit could pay a registration fee, but better discounted rates for each transaction the financial option enjoy for your business. Conversely, if your business is new and potential money still not set up is, or if you pay only a small number of sales per month, the cheaper option may be more per transaction but avoid a notification pay a fee. If the third-party merchants each month charges a minimal fee for their services and you have a low turnover, you have to judge whether your profit margin enough to warrant the amount you will pay service and perhaps consider views on alternative processors. Locate hidden fees such as statement fees.

Financial guarantee should not be the only consideration. While plenty of reputable credit card processors are available, there are some third-party merchants who are just out to make some fast money. Try you, with a company register, which has a long history and well established track record. Use whenever possible, personal recommendations to find a company with a good reputation. Check, whether they be to deposit funds into your existing bank account, will be how some companies that you set up an account with their own bank. You need to check which type of business of the third-party distributors are ready, is to take over. For example, process some only sell credit card transactions for business, which are physically delivered, while others employ only software authors.

Select a third-party trader is an important decision for your business. Make sure that you the packages offered by multiple credit card processors before committing one compare in particular.

Lily writes on a variety of topics. Their latest articles cover topics such as making your own children donkey costume and dressing up suggestions such as Buzz Lightyear Fancy Dress.

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Small business eTailer - survival tactics

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Small businesses work hard to find and take care of, the treasured 20% of great customers that make every day worth the effort. They are why we keep moving forward with constantly improving and enhancing the customer experience. But small business owners know great customers really are only 20% of the Customer Service day. Fraud prevention and interacting with the risks of the global internet are the largest issues in growing a successful business; are ongoing, and never easy.

Most anti-fraud material and election year legislation is all about protecting consumers, while little press exists about serious risks those protected consumers can present to small online merchants. Retailers in general but especially smaller e-tailers, are under siege in environments overly emboldened by easy litigation, lack of internet controls, and over-hyped consumer protection initiatives.

Smaller retailers grapple with the balance between attracting as many consumers as possible to generate revenue, while barricading their businesses from a steady stream of unsuitable customers that persistently drain human, public relations, and financial resources through outrageous demands, tantrums, threats, and even outright fraud. Complicating things are Credit Card Issuers that can be more than accommodating in charging merchants immediately when difficult customers claim "no fair" (after receiving the merchandise of course) with a righteously indignant "I am not satisfied!" excuse.

Occasionally, an angry customer may opt to try and ruin lives by submitting horrific reviews and blogs, on any public website with a great big javascripted "submit" button. Don't panic. Issue an equally public response to the same forum that is carefully written, and impersonal, making it clear to the whole world your people are very concerned and surprised at any customer disappointment; and look forward to the opportunity to serve that ... er .... person ... again. The main point is, to counter with a response that announces "hey, this company really DOES care about service ... what is that whiner talking about?".

Outside of the most deserving people in your customer base, family and social circles, it's a new age of reckless, "I don't care just gimme or you'll suffer" brutishness that inevitably creates high victim counts, and higher costs for the nice guys. Small online merchants are gradually, sometimes painfully, learning what it takes to fend off the worst of it.

Most importantly, customer screening and credit card fraud prevention go hand in hand. Typical characteristics of a potentially bad customer often mirror a fraud risk profile for the merchant as well. It must be said that credit card companies do offer anti-fraud guidelines that should become SOP for pre-screening orders. That said, here are a few more strategies experience in online retailing has taught me:

Free Email Users. As it happens, "freemailers" are suspect according to Credit Card Industry guidelines, but some of our best customers also use free mail services. I can say that most of the worst customers we have ever had also placed orders using free email accounts such as hotmail or gmail. Profiling in any context isn't exactly dernier cri nowadays; and because so many of our nicest customers use freemail, we go with it.

Actual Case: Customer uses an organic blanket for 2 months then demands a refund because it smells funny. When Customer Service rightly refuses, citing policy and federal sanitation guidelines then wishes the customer a nice day, daily screaming email streams from the hotmail account commence, complete with chargeback threats and, yes, ALL CAPS.

Target or Macy's: No big deal ... send lovely letter that says "Sorry, Policy. Can't wait to serve you again soon!", and customer can go blog their brains out.


Small businesses: Refund the money (with lovely letter) and bolt the door. You don't need that.

Before processing orders ensure somebody follows ALL security check procedures provided by the Credit Card Issuer(s) for each transaction. Take the time to telephone flagged customers and verify shipping address, identity, and participation of the cardholder. If warranted, refuse to process the order without the invasive, infamous, "Credit Authorization Form". Oh WOE to the Privacy Act!

Fax it or shop elsewhere.






International Shipments. Unless your business can afford to absorb 70-80% of high ticket international transactions in losses, DO NOT SHIP OVERSEAS. Only American Express has the ability to verify international credit cards at this time, so it's open season on stolen MasterCard and Visa cards. Criminals simply take delivery of hundreds or thousands USD in merchandise; then 87 days after the transaction claim they knew nothing about it. The only loser is you the merchant, as you watch your stolen merchandise get sold on eBay. Side note: there's a lot of stolen organic bedding out there. What's on your bed?

Our advice to small business owners: No shipments outside the USA, Canada, Alaska, Hawaii and Puerto Rico. Period.


(Proceed with caution when shipping to Hawaii or Puerto Rico though. Certain former U.S. postal agencies have a remarkable propensity for losing merchandise over large expanses of water, creating an entirely new breed of bad days.)






Chargebacks. A truly nasty weapon; a threat that gives a few people wierd satisfaction. Most (not all) chargebacks amount to legalized theft that makes customers feel comfy about applying for a credit card at merchants' expense. You can count on it being used by the freemailer deliberately projecting a rage factor for his/her issue (watch for that catchphrase "I am APPALLED!". Uh-huh. Guaranteed chargeback if you just shipped 3 thousand bucks worth of wholesale goods to "a friend" of the cardholder's in Shanghai ("I was not satisfied with the service").

Problem 1: Merchant pays vendor wholesale ( $150.00) for product plus shipping ($45.00) to deliver to customer. Later, chargeback is debited against the Merchant for full amount charged at retail. Instead of earning, say, 40% gross profit on the sale, Merchant has not only paid ($195.00), he has now paid (wholesale+shipping $195.00)+(retail+shipping $255.00+tax $13.50), or over 200% cost out of pocket AND lost expensive merchandise to a legally enabled petty crook, just for the pleasure of recording a nice sale on the books. The boneheaded crook doesn't care. On eBay he/she will probably net about $150.00 making the original merchandise worth $210.00 at retail worth $463.50 in losses, plus $150.00 or more in profit to the criminal

Problem 2: Even if Merchant can get a reversal, some third party processors, including PayPal, may suddenly freeze a company's assets completely when a chargeback is issued. More than likely the freeze of your assets will last at least 180 days or 6 months. (It is written that PayPal did settle a class action lawsuit over this issue, but I wouldn't count on anything.) A vulnerable small business can be destroyed and the owner's credit possibly wrecked for years. Which is why the occasional vindictive customer will deploy that threat with such sadistic delight.


First, if possible cancel the order or refund immediately, then slam the door. (Sorry, the overseas shipment is a loss.) If they try to order again, send the most darling, pro-customer "thank you so much for shopping our website" rejection letter in the template arsenal, and do NOT accept another order. That would be a blacklist item by the way.


If the chargeback is issued, don't be intimidated. The foreign goods are a loss of course. For domestic shipments if possible, rebut to the Card Issuer with those UPS tracking numbers and insist the chargeback be reversed. Notify customer you have provided proof of shipment to his credit card company, and he will be re-charged. Don't tell him his credit privileges with your store are also permanently suspended. You don't need to encourage the customer to plaster nasty prose about your company all over the internet.

Make sure your business has more than one merchant processing account ready to go in a New York nanosecond. If the worst happens, don't let another transaction get processed. Switch instantly.

Never keep large balances with processors such as PayPal or any other related financial institution, where assets can be unexpectedly seized. Routinely transfer enough operating income to the connected bank account and move the rest OUT to another account altogether, where it cannot be touched.

Wish I could close with the comforting assurance that with a bit of caution all your dreams will come true, but that would not be accurate. Fact is, Yes, serious online retailing is definitely about finding good customers and making enough money to grow the business and live well. But it's also largely about shielding your business and assets. Small businesses must have solid, flexible, and opaque protections in place. Secondly, it's about locating and properly marketing to quality consumers, while discouraging customers that probably cost more than they should. Finally, it's about doing your best to ensure product delivery and satisfaction for all customers, rewarding good people appropriately, while quietly removing the occasional bad eggs that can poison the entire basket.

Susan Fullen-Yurek is an online entrepreneur primarily engaged in organic bedding and linen retail sales, and developing acquired internet spaces for future use. While this article is not relative to the organic industry, she deemed the content important enough to share with other small business owners.

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New merchant account quick start guide for small businesses

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The process of getting a new merchant account can be pretty intimidating. There's a lot of information out there about merchant accounts and most people don't have time to wade through all of it before getting a new account. If you're that person, this tutorial is for you. If you're pressed for time, here's the vital information that you need to know before, during and after you get a new merchant account.

Merchant accounts are very important and we suggest investing the time to learn about them when possible. But for now - this tutorial will get you started down the right path.

Laying the Ground-work:

There's a lot of competition out there. Use it to your advantage.

The market for new merchant accounts is highly competitive and providers are willing to do whatever they can to get your business. Use this competition to your advantage and get quotes from at least three different providers. Most importantly, don't be afraid to let each provider know what their competitor is offering. Processing rates and fees aren't set in stone. Providers can move things around to try and best their competition. Let each provider know what the other guy is offering and you'll see rates and fees drop.

An online service called CardFellow is a great resource for getting quotes for a new merchant account. All you need to do is create a free account and providers will give you quotes right online. CardFellow will also help you select the best quote by working with you and the provider through their on-site Merchant Message Board. It's great service definitely worth checking out.

Not all contracts have a term.

Technically, all new merchant accounts have a contract - it's the contract term and the cancellation fee that you should watch out for. A contract term is the period in which if you cancel a merchant account, you will have to pay a cancellation fee. Month-to-month merchant accounts without a term can be cancelled at any time without a fee.

Don't disqualify a merchant account just because it has a contract term. Sometimes imposing a contract term will make it possible for a provider to lower rates and fees or lend a piece of equipment free of charge for the length of the term.

If you do end up considering a merchant account with a contract term, here are a couple of things you should be sure to ask about.

Term Auto-Renewal - Some merchant accounts have language in the contract that automatically renews the contract term if the account isn't cancelled within a certain timeframe. The cancellation period is usually about thirty day, but all accounts are different.
There's no guarantee - Merchant account contracts with or without a term don't guarantee that rates and fees will remain the same. Merchant account agreements have out-clauses that make it possible for providers to change rates and fees so long as they give notice of the changes. The notice of any changes will be posted on your monthly merchant account statement - that's why it's so important to read them every month.

You have to pay all rates and fees.

Even though discount and transaction fees account for the majority of credit card processing expense, you still have to pay all the other fees. Keep this in mind when you're comparing new merchant accounts. Providers know that discount and transaction fees are scrutinize the most by prospective providers and you may not find there's much of a difference in these fees between providers. However, fees like monthly minimums, statement fees, and other important but less visible fees may vary greatly. When you're looking for a new merchant account, compare all aspects and fees of the accounts, not just discount and transaction fees.

Equipment doesn't cost a fortune.

One of the biggest misconceptions about credit card processing is that credit card machines cost a fortune to purchase. That's just not the case. Very good terminals with thermal printers and other bells and whistles can be purchased new for $400 or less. Wireless terminals and other specialty equipment may be slightly more expensive, but it's still very reasonable if you find the right provider.

Before jumping into an expensive leasing agreement, shop around for different equipment prices and deals. Many providers even give terminals away with a new merchant account. Sure, you'll have to give it back if you close the account - but you didn't have to pay for it in the first place.

When you're applying for a new account:

There are no hidden fees.

I know it goes against all of the horror stories you've heard - believe it or not - merchant accounts don't have hidden fees. With that said, they do have hard to see, often overlooked fees. Merchant account providers can't charge you anything that you haven't agreed to in the merchant service agreement that you have to sign when opening a new account.

When you're opening a new merchant account, the provider will give you a couple documents to review. The first document is called the merchant service agreement and it's usually between fifteen and twenty-five pages long. The second document is called the schedule of fees and it's usually two or three pages long.

Be sure that you receive and review both of these documents very carefully before signing anything. It won't be the most interesting read that you've ever had, but it will be one of the most important. If you've unsure of anything in either document, ask the provider for a thorough explanation.

Give thought to your processing volume and average ticket.

When you're filling-out your new merchant account application, you'll have to declare a monthly processing volume and an average ticket. The term processing volume refers to the gross credit card sales in a monthly period and average ticket refers to the average dollar value of a credit card sale.

The underwriter at the processor uses these two figures to access the risk associate with your new account. Basically, that means they take these numbers pretty seriously. If you grossly exceed either of these figures once you begin processing, your account may be frozen or even closed.

Declaring processing volume and average ticket is especially difficult if you're starting a new business and you don't have prior processing history to look at. In this case, work with your provider to arrive upon realistic numbers and then pad those by 10 or 20 percent to be on the safe side. But again, every business is different so be sure to ask your representative for assistance if you're unsure.

Once you start accepting cards:

How much you're charged is determined by how you process transactions and the types of cards that you accept.

It's a bit of backward terminology, but when a credit card transaction charges at a higher rate - it's said to have downgraded. The way a transaction is processed and the type of card that's being processed are the two main reasons why transactions downgrade.

The main types of credit cards that downgrade are:

Business or corporate cards
Rewards credit cards
Government cards
Foreign cards

There's not much you can do to limit downgrades due to card type because card issuers have strict regulations that bar merchants from discriminating against cardholders because of the type of card that they're using. The good news is that you can limit downgrades that are a result of processing errors. Two common and easily corrected processing errors that cause downgrades are:

Failing to clear your credit card batch daily

Credit card batches must be sent to the processor within 24-hours or every transaction in the batch will downgrade. Failing to clear your batch every day can be a very costly mistake. For example, imagine that you've processed $8,000 worth of credit card transactions and you forget to clear batch. The next day you send the batch to the processor, but instead of being charged the qualified rate of 1.7%, the transactions downgrade to 2.5%. That's a difference of $64 just for not clearing your batch in the allotted time. Providers offer something called auto-batch close. As the name implies, this feature will automatically close credit card batches when there are transactions that need to be settled. There's no charge for this service and it will help you avoid expensive downgrades.

Punching-in transactions on a card-present merchant account

If your merchant account was issued under the assumption that you'll be processing transaction when the credit card and the customer are present, you were given what's called a card-present account. Card-present accounts have lower rates when you're swiping credit cards, but all transactions that are manually entered will automatically downgrade. This is a common problem for retail businesses that also process catalog of Internet orders through the same machine. All keyed-in transactions will downgrade to a higher rate. The solution to this problem is to open a card-not-present merchant account.

Chargebacks are serious business

A chargeback occurs when a cardholder contacts the issuer of their credit card to dispute a transaction. When this happens the merchant that made the charge will get a notice regarding the dispute. If and when a chargeback happens to you, it's very important to deal with them quickly. Merchants are given a limited amount of time to respond to a chargeback dispute. If the window of opportunity passes, the cardholder automatically wins the dispute.

Ignoring the fact that chargebacks are very costly, excessive chargebacks may result in your merchant account being terminated.

The best way to protect you business from chargebacks is to stop them before they happen. To do this, create a chargeback prevention plan and be sure to follow it for every transaction. When you do receive a chargeback notification, deal with it immediately.

Scrutinize your merchant account statements

For many businesses, credit card processing charges account for a significant portion of monthly operating expenses. This is reason enough to read your processing statements every month. Statements are confusing and it takes time and effort to learn to read properly - but you can't afford not to!

If you throw your processing statements in a pile each month - stop! Open the statement every month and scrutinize the charges. If you're not sure how to decipher the statement, call you're provider and ask them to explain everything in detail.

Don't forget your processing volume and average ticket

This can't be stressed enough. Grossly exceeding the processing volume of average ticket amount that you declared on your merchant account application can result in your account being close and your funds being frozen. If you need to, write these figures down and post them where you can see them when charging credit cards.

Merchantcouncil.org offers new merchant account information as well a wealth of additional unbiased merchant account information to help businesses make an informed choice about their processing solution.

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Is credit card processing - a good deal for your small business?

Credit cards are all over the place. Earlier, choose cards as payment options accepted a few companies. Now, almost all companies credit payments accept. How came about this change? What makes a popular payment option credit cards? The answer to these questions is affordable fees.

Flawed credit with getting some risks. A role in the credit chain calculate any company that plays for their services. As card facilitates card payments processor for a company, it charges a fee for its service.

Origin of the credit card processors

Extend credit to customers is an ancient policy to secure more sales. The first credit card saw United States in the early twentieth century, with oil companies and hotels is the pioneer card issuers. Processing and collection of bills was carried out by companies House. Then, banks began to offer credit cards and she took over chaotic work processing card transactions. Companies were of the loan from EIB own resources extend to relieved. The task of processing and collecting of invoices transferred to banks.

Success of the early credit card processors

As banks on the task of processing of card transactions took over, started many businesses to accept credit and debit cards as payment options. Visa and MasterCard appeared on the scene offers effective credit processing services, and take the tedious work out of the hands of companies. Credit card business flourished and so has the card processing company.

Arrival of the Internet

The Internet has completely changed the market scene. Big player no longer monopolize market the processing. The Internet has facilitated the entry of the small players in this domain by providing fast and convenient transfer of information.

Lowering the cost of hardware and software has made it possible for small businesses to process electronic payments effectively and at a much lower cost than banks and giants such as visa and MasterCard. The cost of online payment gateway has also drastically reduced and many companies have their products online through e-commerce applications.

Big drop in credit card processing fees

As the Internet of credit and debit processing makes faster and cheaper map, more and more companies are in jumps to get a piece of the pie. Competition brings the cost of processing, the fees as never before. Small businesses can easily the cost of processing fees, make cards provide a viable payment option. This increases also their sales volume, how many customers prefer to pay with credit card.

Appropriate processing fee and good quality service

A good processing fee should not at the expense of low-quality services. Card processors offer many services such as setting up merchant accounts, installing cash registers for processing cards, support for e-commerce applications, secure technology to prevent fraud, and more.

Card processing fee is a key factor that can improve the profit margins of a business. A credit or debit card processing company that offers high processing fees with excellent service is offering a better deal than a, the drop rates and unreliable services.

Daljeet Sidhu is co-founder at TradeSeam. Read our credit card processing advice. Credit card processing Offers to compare.

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