Online Business and Merchant Accounts

With the economy continuing to tank, the thought of an online internet business has probably crossed your mind more than once (Hey, that guy down the street made a killing selling car parts on eBay!). But eBay is small potatoes; you can do so much better than that. You have a whole list of things that could be sold online and used by people around the world. Yes, you my friend have something to offer the world, and now all you have to do is create a website, set up a shopping cart and start taking payments.

Piece of cake, right?



Well, not really. Believe it or not creating an internet business can be just as complicated as creating a retail business - except with an internet business there are no "cash only" transactions. In today's market you have to, repeat, have to, accept credit cards online.

How do you do that you may ask? You do it using something known as a merchant account.

A credit merchant account is your connection to the credit card processing world, allowing you to take credit card transactions directly through your website. Merchant accounts, merchant services and credit card processing companies are all essentially different names for the same service; providing merchants (that's you) with the ability and capabilities to accept credit cards through the World Wide Web (gotta love the internet). For a little more in-depth look at what a merchant account is, check out "What is a Merchant Account / ISO?"

Now, all merchant accounts are not created equal and there are a number of fees associated with them. The typical merchant account fees include a discount rate, transaction fee, address verification fee and gateway fee. There is also a statement fee and usually a monthly minimum.

Let's takes a quick look at what each of these fees are and what they mean to you:

Discount Rate

A discount rate is a percentage of your overall sale. The usual discount rate for online businesses is usually between 2 and 3 percent. This is one of the most important fees to pay attention to when choosing a merchant service. TopTenREVIEWS #1 credit card processing company, Flagship Merchants, has one of the best discount rates in the business. For example, when someone purchases $100 worth of product from your lucrative internet business your merchant account will be charged between $2 and $3.

Transaction Fee

A transaction fee is the price you, the merchant, pay every time someone uses a credit card on your site. Transaction fees are usually between $0.20 and $0.30. This marginal fee is charged every single time someone purchases something from your website, whether its $1 worth of product or $100, the charge is the same for every single transaction.

Address Verification Fee

Because online businesses by their very nature are a bit impersonal, address verification is one of the few ways you and your merchant account provider can ensure that the product is going to a "real" place and credit card is valid. This is why some businesses won't ship outside the United States or to a P.O. Box. The address verification fee is usually only $0.05 or $0.10.

Gateway Fee

Gateways are a little more complicated to explain. Gateways are kind of like your liaison between your website "buy" page and your merchant account. Check out "What Is a Payment Gateway?" for a better idea of how it relates to your merchant account.

Getting an online business started can be a little confusing, but if you've got a great idea (and we know you do) don't let all the "fees" and numbers scare you, they are just the price of doing business online. The right merchant account company can help you navigate your way through the maze of getting an online business up and running. For example, they can fill you in on small tricks of the trade like the fact that if done correctly, your shipping costs will usually offset your merchant account fees.

TopTenREVIEWS offers a comprehensive list of Credit Card Processing and Merchant Account services.