E-commerce: Opening a merchant account
Accepting credit card orders online is a convenient way of doing business, especially for the consumer. There are online businesses that do not use credit card payments, but rather bill and accept cashier’s checks or money orders. In most cases, however, this billing process results in the loss of more than half of the site’s potential customers.
The reasons many businesses don’t like to accept credit cards are many and include financial concerns such as transaction fees, discount rates, setup, statement and application fees, and minimum monthly fees. Combined, this can take a significant chunk out of your potential profit.
If you are developing an e-commerce website, you may find some e-commerce development sites that offer a merchant account for free. Others may charge up to $500 for this type of account. What a merchant account does is allow these credit card orders to be processed.
A merchant account is also required to implement many online shopping carts. The two often work together.
One of the most compelling reasons to look for a merchant account is to expand the potential growth of your eCommerce website. With a credit card sale, the consumer has some level of certainty that they will either receive their product or not be held responsible for the purchase by the credit card company (in many cases). However, with an invoice/prepay plan, the consumer may be concerned about providing cash for something they did not receive. This is especially true when the customer is new.
Essentially, the billing system can work for existing customers, but to grow, you may need to consider getting an e-commerce merchant account and then expanding your marketing plan to increase demand for your product. In turn, increased demand can more than offset the fees associated with credit card transactions.
Some small businesses may use a PayPal account instead of a merchant account to send and receive payments online. This arrangement also requires fees, and some users may not like creating their own PayPal account just to make a payment, but this option may be more palatable for some online business startups or small businesses running a niche corporation.
Knowing the tools available provides some empowerment. Online searches can lead you to a variety of Merchant Account providers, but knowing the options can help you manage your company’s goals and objectives. E-commerce is a big step and the more you know about the options available, the easier it becomes to define the solution.
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