Guest Post: Payment Processing For E-Commerce Sites

Frank Collins is a content writer that enjoys helping aspiring web entrepreneurs figure out the best ways to accept payments on their websites. In today's post, he overviews the payment processing options that an e-commerce site possesses.

Newly started e-commerce businesses have two primary options for accepting payment from their customers. Credit card processing for small e-commerce companies involves either setting up a merchant account with a bank, or creating an account with a third-party processor. Here is what you need to know about both options and how to choose the one best for your business needs:
Credit Card Processing with Merchant Accounts

A merchant account is a bank account for your business which allows you to accept MasterCard and Visa. You can also choose to establish relationships with American Express and Discover Card. With a merchant account, you'll also need to establish a gateway to process credit cards, unless the bank and merchant account you choose has one bundled into the account already.
Not everyone will qualify for a merchant account – as you need to apply and have good credit for approval. When you apply for an account, a credit check is run on you individually, and on the business. If you are approved, you can't use your merchant account for personal use. Your business will be given credit card processing rates based on your level of risk – generally, online businesses are considered riskier than bricks and mortar businesses and receive higher processing rates as a result.

If you have decent credit and think you will be processing high volumes of orders through your e-commerce business, you might consider a merchant account, since you are likely to save money on processing fees with greater volumes of orders than if you use a third party processor. Money received through a merchant account will typically be deposited into your account within 3 business days.

For the majority of new e-commerce business owners, a merchant account is not the best option right out of the gate. The set up and transaction fees are higher for smaller businesses and the majority of start-up companies save money when they process cards with a third party processor. As an e-commerce business grows, and the volume of transactions increases, however, it's wise to look at establishing a merchant account to save money. The rates paid to merchant account providers for larger businesses (those with a larger number of credit card orders to process each month) are lower per transaction than what businesses pay through third party processors for the same number of transactions.

Credit Card Processing with Third Party Processors

Third party processors allow their customers (e-commerce business owners) to share a merchant account. Basically, the third party processor holds a merchant account with a bank, and then allows small business owners to process credit cards through their account, in exchange for a fee.

When you use a third party processor to accept credit card payments from your customers rather than your own merchant account, you can expect the third party processor company to put their name on your customer's billing statements, since it is their account handling the card processing.

For new business owners who aren't sure how many sales they may make each month, a third party provider is a great way to get started. If you don't have strong enough credit to qualify for a merchant account, the third party provider still gives you a way to accept credit cards and start your business while you focus on rebuilding your credit.

There are generally no set up fees, and no monthly fees – instead, you pay a percentage from each credit card order you process. This allows a start-up business owner the ability to see whether their business idea is a viable one; and grow the business without a lot of upfront overhead required to get started. Later on, if your business becomes successful and starts processing large volumes of orders, it will be more worthwhile to look at opening your own merchant account.

Frank Collins is an experienced writer and entrepreneur, sharing his experience from processing payments online and off. To find out more about how to accept payments for your services or goods visit the credit card processing blog.