1:18 PM
Kinsz
'Free' Accounts or Merchant Accounts?
Anyone who does business online (and actually takes money from other people) must, at some point, bite the bullet and choose a credit card processing company - this can be quite an expensive decision.
There are effectively two different ways of going about this; you can either go for the free accounts or the specific merchant accounts.
But what is there to distinguish the two? After all they both allow you to accept a payment from a credit card holder right?
Nicely yes, they both permit you to accept payments from men and women with credit cards - but you will find some underlying and fundamental differences that you needs to be aware of.
Lets have a look at merchants accounts (ICann, WorldPay or 2Checkout - just as examples), when you register with one of these guys you will have to provide information relating to your business and prove that you are actually a registered business.
You'll also need to pay a setup fee, from individual expertise I know that this could be inside the order of many hundred dollars, you may also pay a yearly subscription or support fee - once again this is normally a couple of hundred dollars a year.
You may feel that this is OK - but do not forget you are also paying a percentage with the transaction value, this can be anything up 4.75%.
From this information alone we can see that for the little guy this is quite a high cost - especially if you're just starting out and you don't even know if your product/service is going to take off.
There are also other things that you need to be aware of when looking at professional merchant accounts, for instance 2Checkout will, from time to time try and actually call your customers (a selection of) and verify that the goods have arrived - if they can not do this then they will potentially refund ALL currently held sales.
I mention this as I was made conscious of 2CO's operating policy (this morning) by 1 of my fellow on the web marketers - this guy lost $5,000 due to the fact 2CO phoned the wrong person and lets face it, when you've delivered the items and given a refund how many individuals are going to say 'Yes, here are my credit card particulars again' - not very most likely - after which cancelled the merchants account without so a lot as saying sorry.
So in other words make sure you read the fine print - there is typically stuff in there which is not really in your interest.
Anyway, that's enough about merchant accounts, now lets consider the free accounts - and the first thing to be aware of is that there is no such thing as 'free'. With the free accounts you typically don't pay a setup charge or even a yearly charge - you do however pay a percentage of the transaction value, this can be anything from 1.5% up to 4%.
The two main suppliers of free accounts are PayPal and StormPay. It should be noted that although they both provide pretty identical services there are advantages and disadvantages associated with each of them.
For instance, StormPay typically charge slightly a lot more per transaction then PayPal - even so PayPal charge much more to obtain your money out then StormPay. PayPal is also Very fast to respond to allegations of foul play (regardless of whether it exists or not) and typically really slow to do something about it (besides locking your account).
PayPal also has some bizarre habits in relation to cash laundering rules, for instance my younger brother plays on Ebay and makes several dollars here and there - nothing suspicious about that appropriate (especially seeing as Ebay owns PayPal) but for some reason when his balance went past $50 they locked his account for a couple of weeks and sent him mails requesting proof of ID and wanting an explanation of exactly where the money had come from.
No such difficulties with Storm pay, they validate you when you sign up by successfully linking you to your credit card to your address - any suspicious transactions are followed on a more gentlemanly basis. As of the time of writing I've not heard of anybody utilizing Storm Pay having their account locked for questionable reasons.
When it comes to signing up for the service StormPay is by far the quickest and in terms of market place saturation is also on the up and up (PayPal will be the established norm but StormPay is catching up rapidly).
One thing to remember no matter which type of payment processor you use is that if a customer demands a refund 9 times out of 10 they're going to get it - unless you can satisfy your processor that you have done everything that they require (so for PayPal if you're sending tangible goods you need proof of postage that identifies what you've sent and in the case of allegations of 'no delivery' proof that it has been received - and then there's still no guarantee that they'll rule in your favor).
One important distinction between payment processors will relate to geography, i.e. where in the world they accept payments from. Most of the free services do not accept payments from central Africa or south East Asia, this is purely to do with level of fraud (Just think Nigeria).
To summarize, for the brand new business who has little or no client base and has no idea if their offering is going to be picked up by the market it is better to start with a free account, my personal recommendation being Storm Pay. If your business later grows and requires specific merchant account functionality then you can always upgrade or pick one from the market.
If you would like a StormPay account use the following link: http://www.stormpay.com/?2430996
Anyone who does business online (and actually takes money from other people) must, at some point, bite the bullet and choose a credit card processing company - this can be quite an expensive decision.
There are effectively two different ways of going about this; you can either go for the free accounts or the specific merchant accounts.
But what is there to distinguish the two? After all they both allow you to accept a payment from a credit card holder right?
Nicely yes, they both permit you to accept payments from men and women with credit cards - but you will find some underlying and fundamental differences that you needs to be aware of.
Lets have a look at merchants accounts (ICann, WorldPay or 2Checkout - just as examples), when you register with one of these guys you will have to provide information relating to your business and prove that you are actually a registered business.
You'll also need to pay a setup fee, from individual expertise I know that this could be inside the order of many hundred dollars, you may also pay a yearly subscription or support fee - once again this is normally a couple of hundred dollars a year.
You may feel that this is OK - but do not forget you are also paying a percentage with the transaction value, this can be anything up 4.75%.
From this information alone we can see that for the little guy this is quite a high cost - especially if you're just starting out and you don't even know if your product/service is going to take off.
There are also other things that you need to be aware of when looking at professional merchant accounts, for instance 2Checkout will, from time to time try and actually call your customers (a selection of) and verify that the goods have arrived - if they can not do this then they will potentially refund ALL currently held sales.
I mention this as I was made conscious of 2CO's operating policy (this morning) by 1 of my fellow on the web marketers - this guy lost $5,000 due to the fact 2CO phoned the wrong person and lets face it, when you've delivered the items and given a refund how many individuals are going to say 'Yes, here are my credit card particulars again' - not very most likely - after which cancelled the merchants account without so a lot as saying sorry.
So in other words make sure you read the fine print - there is typically stuff in there which is not really in your interest.
Anyway, that's enough about merchant accounts, now lets consider the free accounts - and the first thing to be aware of is that there is no such thing as 'free'. With the free accounts you typically don't pay a setup charge or even a yearly charge - you do however pay a percentage of the transaction value, this can be anything from 1.5% up to 4%.
The two main suppliers of free accounts are PayPal and StormPay. It should be noted that although they both provide pretty identical services there are advantages and disadvantages associated with each of them.
For instance, StormPay typically charge slightly a lot more per transaction then PayPal - even so PayPal charge much more to obtain your money out then StormPay. PayPal is also Very fast to respond to allegations of foul play (regardless of whether it exists or not) and typically really slow to do something about it (besides locking your account).
PayPal also has some bizarre habits in relation to cash laundering rules, for instance my younger brother plays on Ebay and makes several dollars here and there - nothing suspicious about that appropriate (especially seeing as Ebay owns PayPal) but for some reason when his balance went past $50 they locked his account for a couple of weeks and sent him mails requesting proof of ID and wanting an explanation of exactly where the money had come from.
No such difficulties with Storm pay, they validate you when you sign up by successfully linking you to your credit card to your address - any suspicious transactions are followed on a more gentlemanly basis. As of the time of writing I've not heard of anybody utilizing Storm Pay having their account locked for questionable reasons.
When it comes to signing up for the service StormPay is by far the quickest and in terms of market place saturation is also on the up and up (PayPal will be the established norm but StormPay is catching up rapidly).
One thing to remember no matter which type of payment processor you use is that if a customer demands a refund 9 times out of 10 they're going to get it - unless you can satisfy your processor that you have done everything that they require (so for PayPal if you're sending tangible goods you need proof of postage that identifies what you've sent and in the case of allegations of 'no delivery' proof that it has been received - and then there's still no guarantee that they'll rule in your favor).
One important distinction between payment processors will relate to geography, i.e. where in the world they accept payments from. Most of the free services do not accept payments from central Africa or south East Asia, this is purely to do with level of fraud (Just think Nigeria).
To summarize, for the brand new business who has little or no client base and has no idea if their offering is going to be picked up by the market it is better to start with a free account, my personal recommendation being Storm Pay. If your business later grows and requires specific merchant account functionality then you can always upgrade or pick one from the market.
If you would like a StormPay account use the following link: http://www.stormpay.com/?2430996
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