E-Commerce Beginners Guide: Third-Party Credit Card Processors

The majority of beginning businesses and many developed e-commerce solutions choose to utilize the services of the third-party credit card processors for their credit card processing needs. Why choose third-party credit card processors and what are the potential disadvantages of such solution?

Third-party credit card processors facilitate the process of accepting credit cards on-line (card not present mechanism). The primary advantage is the absence of the necessity to get through the formalities that are inevitable while registering a merchant account. Registering an ordinary merchant account requires substantial investments ($2,000 - $10,000) and takes significant time due to bureaucratic formalities. Furthermore, registering a merchant account may be even more complicated problem for international merchants that do not have credentials in the US or other developed countries. Third-party credit card processor is an optimal solution for beginners because it allows to start selling goods and services on-line within several days, including arrangement of the technical nuances. Another benefit of the third-party credit card processor is the limitation of the vendor's liability. Third-party credit card processors normally introduce security mechanisms that are developed in the process of work, which enables them to track the fraudulent transactions effectively, which reduces the vendor's risks.

Third-party credit card processors are functioning because they charge their clients for each transaction processed through the processor's merchant account. Therefore, discount rates and transaction fees charged by the third-party credit card processors are somewhat higher than those proposed to "real" merchant account holders. However, it is necessary to take into account the financial expenses and amount of time required to register a merchant account. Merchant account providers are very demanding, especially to new businesses and this is yet another reason to start your e-commerce business with the third-party credit card processor.