Website design By BotEap.comWe all know that accepting credit cards is the key to online sales. Unfortunately, most merchants don’t realize that getting a merchant account can save them money. And in many cases, a lot of money!

Website design By BotEap.comFor this experiment, we will use a fictional character named Bill. Bill owns and operates an excellent online resource for marketing tools and resources. The Bills website is a membership based website and therefore could be approved for both third party processing and an internet merchant account. Bill starts processing his business with a popular third-party processor that offers him the following plan:

Website design By BotEap.comInitial fee: none

Website design By BotEap.comMonthly Fee – None

Website design By BotEap.comTransaction fees: 13.5% (initial or one-time), 15.0% (recurring)

Website design By BotEap.comBills sets up his business with this popular third-party processor and charges $30 per month. It has built an extensive reciprocal link exchange directory, has bought some PPC ads on some of the top search engines, and has achieved a great place in the content-based search listings for the top 5 search engines. Their customer base has grown from zero before accepting credit cards, to 150 members, in just one month. Bill can’t believe his success in internet marketing and is planning to build even more web-based resources and tools for his website, thereby increasing the value and content. He’s ecstatic with the early results, so let’s take a look at Bills’ numbers:

Website design By BotEap.com$30 (per membership sold) x 150 (membership sold) = $4,500.00

Website design By BotEap.com$4,500 x 13.5% (Initial or One Time Transactions) – $607.50

Website design By BotEap.com$4,500.00 (In total sales)

Website design By BotEap.com– 607.50 (Total fees)

Website design By BotEap.com= $3,892.50 (Net profit after deducting all processing fees)

Website design By BotEap.comWell, Bill certainly had a great first month accepting credit cards with his new business venture. But let’s see how Bill would have fared if he had gotten an Internet merchant account for his new business:

Website design By BotEap.comInitial fee None

Website design By BotEap.comMonthly Fee $15.00

Website design By BotEap.comDiscount Rate 2.35% (Initial, Single or Recurring)

Website design By BotEap.comTransaction fee 0.30 cents

Website design By BotEap.comGateway Month Fee $15.00

Website design By BotEap.comAVS Fees .10 cents

Website design By BotEap.comNow the first thing we see is that the merchant account company is showing us more fees. This may be daunting at first glance, but we really should explore what these fees are and how they affect our results.

Website design By BotEap.comStart-up fee: remains the same. Bill paid zero to set up his new merchant account, just like he paid zero to set up the third-party processing account.

Website design By BotEap.comMonthly fee: The third-party processor did not offer us monthly fees, but we must pay $15.00 with the merchant account company.

Website design By BotEap.comDiscount rate: The merchant account has labeled one of its rates as a “discount rate”. These fees are the fees that Bill will pay as a percentage of each transaction. They are similar to the main fee charged by the third party processor. This fee, when charged by the merchant account company, is substantially less than the high percentage charged by the third-party processor. But we will wait until the end of this experiment to see who offers the best comprehensive deal.

Website design By BotEap.comPer Transaction Fee: The merchant account company charges Bill .30 per transaction that you process through your merchant account. Of course, we have already established that Bill will not pay transaction fees on the package he received from the third-party processor.

Website design By BotEap.comMonthly Gateway Fee – Because Bill will also need an online payment gateway for his merchant account to work online with your website, he will also pay $15.00 per month for his monthly Gateway fee.

Website design By BotEap.comAVS Rates: The AVS rate stands for Address Verification Service. Bill will want to use this service to help reduce potential fraud and customer chargebacks to his merchant account. You will now pay an additional transaction fee of .10 per transaction.

Website design By BotEap.comLet’s look at the numbers behind processing with a merchant account instead of a third-party processor:

Website design By BotEap.com$30 (per membership sold) x 150 (membership sold) = $4,500.00

Website design By BotEap.com$15.00 (Merchant Account Monthly Fee) – $15.00

Website design By BotEap.com$15.00 monthly gateway fee) – $15.00

Website design By BotEap.com2.35% (Discount Rate) x $4,500.00 – $105.75

Website design By BotEap.com30 cents (per transaction fee) x 150 (memberships sold) – $45.00

Website design By BotEap.com10 cents (AVS fees) x 150 (memberships sold) – $15.00

Website design By BotEap.comTotal fees (with merchant account) = $195.75

Website design By BotEap.com$4,500.00 (In total sales)

Website design By BotEap.com– 195.75 (Total fees)

Website design By BotEap.com= $4,304.25 (Net profit after deducting all processing fees)

Website design By BotEap.comWith the merchant account, Bill was able to keep a substantially larger portion of his sales as profit. Bill could use these additional resources to advertise more, expand his operation, and even hire someone to work for him, even if only part-time. The point is that the best deal on credit card processing is always with a merchant account rather than using a third party processor.

Website design By BotEap.comMost third-party processors take advantage of the high levels of risk and chargebacks they face every day, by charging huge fees and charges to their entire customer base. Third party processors are synonymous with adult related websites. This is the reason for your higher risk exposure. They must charge high fees to overcome the losses they are subject to when processing for a category of merchants who, unfortunate as it is for them, fall into a certain level of risk and fraud that most other merchants do not. Because the business account company restricts their clientele to only companies with non-adult content, they can offer an entrepreneur like Bill, who sells content online through his membership-based marketing website, a much better deal. in credit card processing.

Website design By BotEap.com$4,304.25 (Net Income with Mercantile Account)

Website design By BotEap.com– 3,892.50 (Net Income with Treatment to Third Parties)

Website design By BotEap.com= $411.75 (Total Savings with Mercantile Account)

Website design By BotEap.comThis experiment has shown that the average website owner can save substantially by choosing wisely when it comes to their credit card processing solution. We’ve shown that most business owners can and will save substantial amounts of money by using a merchant account for their online credit card processing, rather than processing with a third-party processor. In our little test, Bill saved $411.75, and that was just in the first month.

Website design By BotEap.comRemember, the third party processor will charge more, 15.0% to be exact, per transaction, once the customer is charged on a recurring basis. This means that for the second month, Bill would have paid the third-party processor even more than him; $675.00 to be exact! And that’s just in the first few months returning 150 customers. Every time Bill has a recurring payment processed through his third-party processing account, he would be subject to a 15.0% transaction fee on all those sales. Not a very cheap option for credit card processing.

Website design By BotEap.comAs with any business decision, be smart. Compare rates and plans, and make sure the “simple” setup is really worth it. In most cases, your merchant service provider can set up your merchant account in as little as 24 hours. This is faster than your third-party processor and adds even more value to the otherwise much higher offer you’re receiving with your own merchant account.

Website design By BotEap.comMake the decision that is best for your business and good luck! Visit Josh Greth at CardStreet.com.

Website design By BotEap.comCopyright 2003 Josh Greth. All rights reserved.