Comparing Merchant Accounts – A Quick Way To Compare Merchant Accounts
Tuesday, December 2nd, 2008
Being able to take credit cards is massively important to any business wanting to actively sell goods and services on the web. When businesses started selling online it was understood that relying on credit cards was not a good idea, because it applying a real world technology to the Web. New companies tried to offer micro payment systems such as “flooz”, but they didn’t achieve critical mass. The truth is, approximately 10 years on from the launch of businesses online, still typing in credit card numbers to buy online and therefore accepting credit cards when offering products online is still vital.
Basically, there are two different ways to accept credit cards online. Let’s compare merchant accounts. A business can either sign up for a merchant account, which allows the business to process credit cards in their own business name, or they can sign up with a third party processor, who does the actual credit card processing on behalf of the business selling the products. Getting a merchant account has higher upfront costs, but has smaller per item fees. Using a third party solution costs less initially, but has higher per sale costs.
The decision as to whether or not to get a full merchant account or use a third party solution is simply a question of crunching the numbers. Let’s look at two different business types and compare merchant account benefits…
In most cases, established businesses who are already trading locally and simply want to start selling on the Internet will be suited to getting a merchant card processing account. Most likely, Usually they will already have a real world merchant card processing account and will tailor that account to add the ability to do “MOTO”, which is “Mail Order Telephone Order” processing and simply means that the cardholder is not there at the time of purchase.
For micro businesses starting out online selling new software or a new ebook, it is think about testing their sales using a third-party solution. The advantage to the new business is that there’s hardly any initial cost which means they can test their business model quickly and easily. If the market is profitable, they can eventually look to reducing the per-item costs by getting their own merchant card processing account. If the market isn’t profitable, they can quickly leave the market without having paid significant upfront costs to get their own merchant account.
