Ecommerce Merchant Account ??” Are You Paying Too Much?
If your online business has to grow and be successful, you must be able to provide your customers with alternate payment options such as through credit/debit cards. For this, you need an ecommerce merchant account. However, in most cases people tend to spend too much while setting up a merchant account. The most important reason for this is lack of awareness about merchant accounts and the underlying costs that are charged by many merchant account providers.
So how does an ecommerce merchant account work? For this one needs to understand the different components involved in an online credit card processing system. Also, one must know in detail how these components are integrated with one another. Then only one can understand the charges that need to be paid so as to process credit card payments.
The three basic components of online processing include
• Payment Gateway – This is the component that links the website to the merchant account provider through a virtual terminal. It is through this payment gateway that the customer submits his/her credit card information and other billing details. These details are then routed to the merchant account provider, who then verifies them and approves the transaction. Once again, the approval is sent back through this payment gateway and the transaction gets completed.
• Internet Merchant Account – An internet merchant account is an agreement with a bank or financial organization that allows you to accept credit card payments on your website. When the customer details are submitted through the payment gateway to the merchant account provider, it is at this point that the transaction is verified and approved. Internet merchant account provider is also connected to various card issuing banks through another terminal. It is through this route that your ecommerce merchant account provider submits bills on your behalf and collects the money. After deducting charges, the net transaction amount gets deposited into your checking account.
• Website – It is important that your website is compatible with the payment gateway provider that you choose and your merchant account provider. In most cases, providers have certain requirements that need to be fulfilled before they provide service to your website.
Only when these three components act in-sync, you can realize a safe and secure online payment transaction without any hassles. Interestingly, none of these components are available for free. Costs can be broadly classified into upfront charges and maintenance costs. Upfront charges usually involve application fee, setup costs and if required, price of the software and equipment. Maintenance charges usually differ from provider to provider. A variety of maintenance charges are needed to be paid for getting an ecommerce merchant account. Some of these charges include transaction charges, discount rates, monthly maintenance fee, termination fee, annual fee, and chargebacks. It is important to understand in detail about all these charges if you want to get a good deal on your ecommerce merchant account.
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