Is Accepting Credit Card Payments Necessary for Online Business Owners

For online business owners today, offering the options customers want is a vital aspect of winning the sale. Multiple payment methods give consumers a choice, but credit card payments are far and away the most popular. Credit cards are convenient for consumers to use and sites that accept them show higher revenues from impulse purchases and other add-ons.

There are two ways that ecommerce sites can arrange to accept credit card payments. One is by establishing an online merchant account through the business owner’s own bank or through a company that specializes in online merchant accounts. Another is to use a third-party service to process the payments.

Online Merchant Accounts – An internet merchant account is essentially a separate bank account that allows you to accept credit card payments without having to actually see the card or card user in person.

Funds from credit card purchases, less the agreed-upon fees, are deposited into the merchant account, then moved to the owner’s business account on a regular basis (usually within 48 to 72 hours). The primary disadvantage is that approval for merchant accounts is more difficult to obtain for internet businesses than for standard retail businesses. Every company has its own qualification guidelines and fee schedules.

The main benefit of having a online merchant account is that the transactions appear on your customer’s credit card bills under your business name. This will help reduce the number of chargebacks you get from customers who don’t remember a purchase, and see it listed on their accounts under the payment gateway’s name.

Also, once you are processing $1,000 a month in sales or more, an online merchant account becomes more affordable than other solutions, as the per-transaction fees tend to be less expensive.

Paypal – Third-party services such as Paypal eliminate the need for a merchant account. They offer real-time processing of payments and transfer of funds to the business owner’s account for a fee, usually a small flat rate plus a percentage of the sale total per transaction.

Other features available might include a shopping cart that the business owner can install on the website, conversion from U.S. dollars to foreign currency, the ability to accept multiple forms of payment (such as electronic debits or echecks), customer service, and set-up assistance.

PayPal offers three account types, two of which can be used by merchants to accept credit card payments: the Premier Account and the Business Account. An individual can open a Premier Account, but a Business Account can only be opened by a registered business. A 2.9 percent fee is charged for receiving a payment, but as the dollar volume increases, the rate drops. Premier and Merchant Account holders can incorporate special html code into their website to create a “Buy Now” button. With one click, the customer is taken to a payment page to complete the transaction.

PayPal also provides a shopping cart to merchants. This software lets the consumer select multiple items for purchase, then proceed to the payment page to pay for all selections at once.

The cost for setting up a merchant account, processing gateway, and shopping cart can range from $500 to $1,500, even more if the etailer chooses to hire a web developer to consult on or install the system. However, this initial investment can be well worth it for the serious business owner.

For the start-up or small business owner, third-party services such as PayPal may provide a more accessible, affordable alternative to traditional banking options.

Teaching Tuesday: Most Economical Way Of Selling Products Online

Ana Rodriguez submitted this question to our survey:

What is the most economical way of selling products online? This means not having a shopping cart and instead using Paypal or money orders? Is cost of Paypal worth it?

Does this shut out people who are not members of Paypal or don’t want to use it? My business is a fundraiser and I am currently setting up a website and figuring out the logistics of this.

PS I am doing fundraisers for churches and I am trying to set something up on website where churches can be assurred that all outside orders are being credited to their account. It’s either that or put the order-taking in their hands? These are custom orders.

My response: I see many websites that are most likely trying to save money by not having a shopping cart or online payment system in place. Unfortunately, I think what they are doing is leaving money on the table.

When people are shopping online are in the buying phase of online shopping, they are wanting to make a purchase — and they want to do it now. Requiring people to fill out a form and wait for an invoice, then send a money order takes too long and most buyers will have found an automated system somewhere else.

Using Paypal’s buttons is a step up and makes the process much easier from the perspective of the customer. However, if you have inventory, then managing the inventory and orders is going to quickly become a hassle without a shopping cart, such as the Shop Kit Plus.

So, in my opinion, it’s more economical financially and in terms of time, to use a shopping cart with Paypal, at least.

Now, Paypal is one of the leading payment gateways online. Most people who have been online for very long are familiar with it. From that perspective it is definitely worth having and worth the fees.

On the other hand, there are some people who would prefer not to use Paypal. For them, I recommend you have a second payment processor, such as Authorize.net with an internet merchant account (if you process more than $1,000 in sales per month), or a solution like Propay if you want to process the cards manually. (You can do this with Paypal, and you can allow people to pay through Paypal without signing up for an account. But those who don’t like Paypal are still not going to trust this option.)

In your situation, I would recommend setting up a site (hosting account and domain name) for each church and using a shopping cart and a Paypal account that is in the church’s name. I would also require each church to be in charge of maintaining their own sites — unless you want to offer maintenance for a fee.

Do you need answers? Submit your question to our Product Seller’s survey!